2021
Annual Report
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Dear Stockholders,
2021 was an exceptional year for ABM, highlighted by strong financial performance and significant
progress on multiple strategic fronts. Throughout the year, our global team continued to execute
at the highest level, successfully navigating through a dynamic environment with agility, resiliency,
and dedication to serve our clients, while at the same time, adapting to ever-changing COVID-19
protocols and advancing our brand and competitive positioning in our served markets.
During 2021 we generated revenue of $6.2 billion, up 4% from 2020. Income from continuing
operations (and net income) was $126.3 million, representing a significant increase over the prior
year, while adjusted income from continuing operations* increased 49% to $243.3 million.
Adjusted EBITDA* margin expanded to a record 7.3%, up 130 basis points from 2020, and
significantly higher than our pre-COVID-19 pandemic level. 2021 also marked 56th consecutive
year in which we’ve paid a dividend, continuing our long-standing history. We are proud of our
financial performance which illustrates the resiliency of our business and the growing importance
of the services we provide across a wide landscape of commercial facilities.
Our strong results were largely driven by increased demand for our proprietary EnhancedClean™
services which we developed in 2020 specifically to address the evolving needs of our clients as
they continue to manage through the COVID-19 pandemic. Revenue growth was also bolstered
by a higher volume of work orders in all our Industry Groups and by our acquisition of Able
Services (“Able”). EBITDA and margin growth were the product of higher revenues and a more
favorable service mix, leveraged by our ability to gain efficiencies through the strategic
deployment of labor.
Further, we produced full year organic revenue growth in all our Industry Groups, apart from
Aviation, which has been the most impacted by the COVID-19 pandemic. That being said,
Aviation grew strongly in the second half of 2021 as commercial air traffic meaningfully
rebounded. Business & Industry (“B&I”) benefitted from new contract wins, continued client
demand for work orders and strong growth in our distribution center end-markets. While office
occupancy trended higher in 2021, office occupancy levels remain low by historical standards.
Education and Technology & Manufacturing (“T&M”) both grew solidly in 2021, with Education
benefitting from a broad-based return to classroom learning, while T&M markets moved in-line
with a generally improved industrial economy. Lastly, Technical Solutions posted mid-single digit
revenue growth, reflecting our fast-growing e-mobility business and improved access to client
sites. I am really excited about the prospects of our e-mobility business, which has a multi-year
growth path in front of it driven by the ongoing transition to Electric Vehicles, which should be
accelerated by the recent passage of the federal infrastructure bill which included $7.5 billion
toward deploying EV charging stations nationwide. We are extremely well-positioned as one of
the largest EV charging station installers in the nation.
We also made great progress on the strategic front in 2021 with the $830 million acquisition of
Able, a leading facilities services provider, which we completed in September. Able, with
approximately $1.1 billion in annualized revenue in 2021, substantially expands our geographic
footprint, broadens our capabilities, and increases our scale. Able derives roughly 60% of its
revenue from engineering and technical services and 40% from janitorial services, strongly
complementing our existing B&I business and helping us be a more comprehensive service
provider with our combined clients. Beyond that, the acquisition will assist in helping us achieve
our strategic growth objectives as we build upon our offerings to include integrated facilities
services and multi-service bundles to our core clients.
We also finalized our new 5-year strategic plan which was introduced at our Investor Day in
December 2021. Our ELEVATE plan was developed from our vast leanings during the COVID-
19 pandemic as well as our unique view and understanding of market trends. ELEVATE is a multi-
year comprehensive investment initiative intended to enhance our use of advanced data and
analytics to capture incremental growth and profit opportunities arising from macro shifts in
demographics, rapidly changing workplace dynamics and the heightened need for increased
corporate sustainability.
At its core, ELEVATE includes strategic investments in revenue growth initiatives, team member
development, workforce management and digital transformation. Able is a great example of a
revenue growth initiative and a critical component of our overall Elevate strategy. In all, we believe
these investments will accelerate our organic growth, strengthen profitability, and create a more
rewarding experience for both clients and team members. I am looking forward to sharing the
progress of our ELEVATE program with you over the coming quarters.
I was also pleased with the progress reported in our most recent Corporate Sustainability Report.
This report emphasizes our ongoing commitment to a diverse, equitable and inclusive workplace,
as well as our obligation to minimize our impact on the environment and to do business in a
responsible way. Our purpose – to take care of the people, spaces and places that are important
to you – is more significant now than it has ever been and continues to drive many of the decisions
we make across the organization. I encourage you to learn more about our efforts by reading our
Corporate Sustainability Report on our website, abm.com.
We are entering 2022 from a position of strength, supported by a healthy balance sheet, solid
cash flow and favorable growth trends across our business. We continue to support our clients
by providing high-value services and solutions that have enabled them to navigate unprecedented
challenges over the past couple of years. And with the recent acquisition of Able and the
ELEVATE initiative, we have positioned ABM for sustained success. In short, I am excited about
the direction in which we are heading and for ABM’s future.
I want to thank our more than 100,000 team members for their amazing contributions in 2021. It
was not an easy year by any stretch, but their unwavering commitment and dedication to our
clients and our Company enabled us to not only weather the continuing storms of the COVID-19
pandemic, but also to rise above these challenges to deliver truly exceptional performance for all
our stakeholders.
Thank you for your continued interest and strong support of ABM.
Scott Salmirs
President and Chief Executive Officer
*Reconciliation of Non-GAAP to GAAP financial measures can be found in the back of this Annual
Report.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-K
(Mark One)
☑
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-8929
ABM INDUSTRIES INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
94-1369354
(I.R.S. Employer
Identification No.)
__________________________
One Liberty Plaza, 7th Floor
New York, New York 10006
(Address of principal executive offices)
(212) 297-0200
(Registrant’s telephone number, including area code)
__________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value
Trading Symbol
ABM
Name of each exchange on which registered
New York Stock Exchange
__________________________
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated
filer
☑
Accelerated
filer
☐
Non-accelerated
filer
☐
Smaller reporting
company
☐
Emerging growth
company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment
of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act
(15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
No ☑
Aggregate market value of the registrant’s common stock held by non-affiliates of the registrant, based upon the
closing price of a share of the registrant’s common stock on April 30, 2021 as reported on the New York Stock
Exchange on that date: $3,412,315,302
Number of shares of the registrant’s common stock outstanding as of December 21, 2021: 67,317,979
_______________________________________________
DOCUMENTS INCORPORATED BY REFERENCE
Certain parts of the registrant’s Definitive Proxy Statement relating to the registrant’s 2022 Annual Meeting of
Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
PART I
Item 1. Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Mine Safety Disclosures.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. [Reserved].
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures.
Item 9B. Other Information.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Item 14. Principal Accounting Fees and Services.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
SIGNATURES
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K for ABM Industries Incorporated and its subsidiaries (collectively referred
to as “ABM,” “we,” “us,” “our,” or the “Company”) contains both historical and forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. We make
forward-looking statements related to future expectations, estimates, and projections that are uncertain and often
contain words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,”
“outlook,” “plan,” “predict,” “should,” “target,” or other similar words or phrases. These statements are not
guarantees of future performance and are subject to known and unknown risks, uncertainties, and assumptions that
are difficult to predict. Factors that might cause such differences include, but are not limited to, those discussed in
Part 1 of this Form 10-K under Item 1A., “Risk Factors,” and we urge readers to consider these risks and
uncertainties in evaluating our forward-looking statements. We caution readers not to place undue reliance upon
any such forward-looking statements, which speak only as of the date made. We undertake no obligation to publicly
update any forward-looking statements, whether as a result of new information, future events, or otherwise, except
as required by law.
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ITEM 1. BUSINESS.
General
PART I
ABM Industries Incorporated, which operates through its subsidiaries (collectively referred to as “ABM,”
“we,” “us,” “our,” or the “Company”), is a leading provider of integrated facility solutions with a mission to make a
difference, every person, every day. Our history dates back to 1909, when American Building Maintenance
Company began as a window washing company in San Francisco with one employee. In 1985, we were
incorporated in Delaware under the name American Building Maintenance Industries, Inc., as the successor to the
business originally founded in 1909. In 1994, we changed our name to ABM Industries Incorporated. Since that
time, we have grown into a multi-segment facility solutions company, primarily through strategic acquisitions and
new service offerings, increasing our revenue from $3 billion to more than $6 billion.
The acquisition of OneSource in 2007 bolstered ABM as a leader in the janitorial market, while the Linc
Group acquisition in 2010 established ABM as a “facility solutions” company with new service offerings, including
lighting, mechanical, and electrical “technical solutions.” With demand increasing for industry-specific service
providers, in 2012 we purchased Air Serv and established our first industry group, “aviation.” In recent years, we
have strategically acquired companies in the United Kingdom (“U.K.”), particularly with the GBM and Westway
acquisitions, which expanded our janitorial and technical solutions businesses overseas.
In 2015, we began a comprehensive transformational initiative (“2020 Vision”) to drive long-term, profitable
growth through an industry-based, go-to-market approach. As part of this initiative, we centralized key functional
areas, strengthened our sales capabilities, and initiated investments in service delivery tools and processes to help
support standard operating practices that we believe are foundational to our long-term success.
As part of the transformation initiative, we also evaluated all of our service offerings and sold our Security
and Government Services businesses, which did not align with our long-term focus on industry groups.
In 2017, we acquired GCA Services Group (“GCA”), a provider of integrated facility services to educational
institutions and commercial facilities, for approximately $1.3 billion, the largest acquisition in ABM history. The
acquisition accelerated the Company’s position as a leading facility solutions provider in the education market.
In 2021, we acquired Crown Building Maintenance Co. and Crown Energy Services, Inc. (collectively,
“Able”), a leading facilities services company headquartered in San Francisco, California, with the goal to provide
additional scaling to the Company’s core businesses and key geographies and bolstering ABM’s janitorial and
facilities services service lines. In addition, the acquisition of Able (“the Able Acquisition”) further expands ABM’s
sustainability and energy efficiency offerings amid growing demand for environmentally responsible solutions.
As a result of these strategic changes, we have strengthened our ability to offer Janitorial, Parking, Facilities
Services, Building & Energy Solutions, and Airline Services, on a standalone basis or in combination, and positioned
ourselves as a leading integrated facilities management company.
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Unless otherwise indicated, all references to years are to our fiscal year, which ends on October 31.
Forward-Looking Strategic Plan
Leveraging the various accomplishments achieved through 2020 Vision, the Company is embarking on the
next step of our journey with a multi-year strategic plan called ELEVATE. Our new strategy is designed to
strengthen our industry leadership position through end-market repositioning and build on our core services, which
we expect will drive significant long-term value for our stakeholders.
Over the next four years, we plan to make significant investments totaling $150 - $175 million and
implement various measures with the aim to ELEVATE:
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the client experience, by serving as a trusted advisor who can provide innovative multiservice solutions and
consistent service delivery;
the team member experience, by investing in workforce management, training, developing the next
generation of ABM leaders, and building on our inclusive culture; and
our use of technology and data to power client and employee experiences with cutting-edge data and
analytics, processes, and tools that will fundamentally change how we operate our business.
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Contract Types
We generate revenues under several types of contracts, as explained below. Generally, the type of contract
is determined by the nature of the services. Although many of our service agreements are cancelable on short
notice, we have historically had a high rate of client retention and expect to continue maintaining long-term
relationships with our clients. See Note 2, “Basis of Presentation and Significant Accounting Policies,” in the Notes
to consolidated financial statements for additional information regarding the contract types that are most common in
each of our service lines.
Contract Type
Description
Monthly Fixed-
Price
These arrangements are contracts in which the client agrees to pay a fixed fee every month over
a specified contract term.
Square-Foot
Square-foot arrangements are contracts in which the client agrees to pay a fixed fee every
month based on the actual square footage serviced over a specified contract term.
Cost-Plus
These arrangements are contracts in which the clients reimburse us for the agreed-upon amount
of wages and benefits, payroll taxes, insurance charges, and other expenses associated with
the contracted work, plus a profit margin.
Work Orders
Work orders generally consist of supplemental services requested by clients outside of the
standard service specification and include cleanup after tenant moves, construction cleanup,
flood cleanup, snow removal, and high touchpoint disinfecting services.
Transaction-
Price
These are arrangements in which customers are billed a fixed price for each transaction
performed on a monthly basis (e.g., wheelchair passengers served or airplane cabins cleaned).
Hourly
In hourly arrangements, the client is billed a fixed hourly rate for each labor hour provided.
Management
Reimbursement
Under these parking arrangements, we manage a parking facility for a management fee and
pass through the revenue and expenses associated with the facility to the owner.
Leased Location
Under these parking arrangements, we pay a fixed amount of rent plus a percentage of
revenues derived from monthly and transient parkers to the property owner. We retain all
revenues received and are responsible for most operating expenses incurred.
Allowance
Under these parking arrangements, we are paid a fixed amount or hourly fee to provide parking
services, and we are responsible for certain operating expenses, as specified in the contract.
Energy Savings
Contracts and
Fixed-Price
Repair and
Refurbishment
Under these arrangements, we agree to develop, design, engineer, and construct a project.
Additionally, as part of bundled energy solutions arrangements, we guarantee the project will
satisfy agreed-upon performance standards.
Franchise
We franchise certain engineering services through individual and area franchises under the Linc
Service and TEGG brands, which are part of ABM Technical Solutions.
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Segment and Geographic Financial Information
Our current reportable segments consist of Business & Industry (“B&I”), Technology & Manufacturing
(“T&M”), Education, Aviation, and Technical Solutions. The newly acquired Able is integrated within our B&I
reportable segment. For segment and geographic financial information, see Note 17, “Segment and Geographic
Information,” in the Notes to consolidated financial statements.
REPORTABLE SEGMENTS AND DESCRIPTIONS
B&I, our largest reportable segment, encompasses janitorial, facilities
engineering, and parking services for commercial real estate properties,
sports and entertainment venues, and traditional hospitals and non-acute
healthcare facilities. B&I also provides vehicle maintenance and other
services to rental car providers. We typically provide services in this
segment pursuant to monthly fixed-price, square-foot, cost-plus, and
parking arrangements (i.e., management reimbursement, leased location,
or allowance) that are obtained through a competitive bid process as well
as pursuant to work orders.
T&M provides janitorial, facilities engineering, and parking services to
industrial and high-tech manufacturing facilities. We typically provide these
services pursuant to monthly fixed-price, square-foot, cost-plus, and
parking arrangements that are obtained through a competitive bid process
as well as pursuant to work orders.
Education delivers janitorial, custodial, landscaping and grounds, facilities
engineering, and parking services for public school districts, private
schools, colleges, and universities. These services are typically provided
pursuant to monthly fixed-price, square-foot, and cost-plus arrangements
that are obtained through either a competitive bid process or re-bid upon
renewal as well as pursuant to work orders.
Aviation supports airlines and airports with services ranging from parking
and janitorial to passenger assistance, catering logistics, air cabin
maintenance, and transportation. We typically provide services to clients in
this segment under master services agreements. These agreements are
typically re-bid upon renewal and are generally structured as monthly
fixed-price, square-foot, cost-plus, parking, transaction-price, and hourly
arrangements. One client accounted for approximately 16% of revenues
for this segment in 2021.
Technical Solutions specializes in mechanical and electrical services.
These services can also be leveraged for cross-selling across all of our
industry groups, both domestically and internationally. Contracts for this
segment are generally structured as energy savings, fixed-price repair,
refurbishment contracts, and franchise arrangements.
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Service Marks, Trademarks, and Trade Names
We hold various service marks, trademarks, and trade names, such as “ABM,” “ABM Building Value,” “ABM
Greencare,” “EnhancedClean,” “EnhancedFacility,” “Linc Service,” “MPower,” and “TEGG,” which we deem
important to our marketing activities, to our business, and, in some cases, to the franchising activities conducted by
our Technical Solutions segment.
Dependence on Significant Client
No client accounted for more than 10% of our consolidated revenues during 2021, 2020, or 2019.
Competition
We believe that each aspect of our business is highly competitive and that such competition is based
primarily on price, quality of service, efficiency enhancements, adapting to changing workplace conditions, and
ability to anticipate and respond to industry changes. A majority of our revenue is derived from projects requiring
competitive bids; however, an invitation to bid is often conditioned upon prior experience, industry expertise, and
financial strength. The low cost of entry in the facility services business results in a very competitive market. We
mainly compete with regional and local owner-operated companies that may have more acute vision into local
markets and significantly lower labor and overhead costs, providing them with competitive advantages in those
regards. We also compete indirectly with companies that can perform for themselves one or more of the services
we provide.
Sales and Marketing
Our sales and marketing activities include digital engagement and direct interactions with prospective and
existing clients, pricing, proposal management, and customer relationship management by dedicated business
development teams, operations personnel, and management. These activities are executed by branch and regional
sales, marketing, and operations teams assigned to our industry groups and are supported by centralized sales
support teams, inside sales teams, and marketing personnel. The sales and marketing teams acquire, nurture, and
manage leads through the sales buying process, as well as train personnel on product offerings, sales tools, and
proposal systems, all governed by standard operating procedures.
Regulatory Environment
Our operations are subject to various federal, state, and/or local laws, rules, and regulations regulating the
discharge of materials into the environment or otherwise relating to the protection of the environment, as well as
laws and regulations relating to, among other things, labor, wages, and health and safety matters. Historically, the
cost of complying with these laws, rules, and regulations has not had a material adverse effect on our financial
position, results of operations, or cash flows.
Corporate Responsibility and Sustainability
As a company with more than 110 years of history and experience, we understand the need to embed and
integrate corporate responsibility into and within our business practices and commit to sustainable operations to
create value and support the long-term success of our business, shareholders, employees, and clients.
Our strategy has evolved over the years to align with our stakeholders’ expectations regarding
environmental, social, and governance (“ESG”) policies. We have established three strategic axes of our
sustainability strategy based on the topics that are critical to our business: doing business in a responsible way to
ensure compliance with ethical business practices and bring sustainable services to the market; ensuring the well-
being and professional development of our employees; and managing our carbon footprint to grow environmentally
friendly practices.
Our Board of Directors and its Stakeholder and Enterprise Risk Committee are responsible for the
Company’s activities and practices relating to social, environmental, and public policy matters. Additionally, our
internal sustainability team works in cross functional collaboration with departments throughout and across the
enterprise to advance our sustainability and ESG strategies.
Since 2011, we have voluntarily published a Sustainability Report on an annual basis in alignment with the
Global Reporting Initiative framework and the Sustainability Accounting Standards Board to address our business,
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our employees, and the environment. More information about our sustainability performance, progress, and goals
can be found in the corporate sustainability section of our corporate website.
Human Capital
Our employees are the driving force behind everything we do, and supporting our employees is a
foundational value for the Company. Direct labor costs represented 68% of our total revenue for fiscal year 2021. As
of October 31, 2021, we employed approximately 124,000 employees, of whom approximately 44,000, or 35%,
were subject to various local collective bargaining agreements. As of October 31, 2021, our frontline employees
represented 93% of our total workforce, while staff and management employees represented the other 7%.
Our human capital strategy is grounded by our values and our employees; we prioritize our human capital
development in order to do business in a responsible way and ensure our employees’ success. The execution of
this strategy is overseen at the highest levels of our organization, from our Board of Directors, our Board of
Directors’ Stakeholder and Enterprise Risk Committee, and across our senior management.
Business ethics
Our Code of Business Conduct ensures that our core values of respect, integrity, collaboration, innovation,
trust, and excellence are applied throughout our operations. Our Code of Business Conduct serves as a critical tool
to help all of us recognize and report unethical conduct, while preserving and nurturing our culture of honesty and
accountability. We provide a comprehensive annual training and certification program on our Code of Business
Conduct for our Board of Directors and all of our staff and management employees.
Human resources, hiring, and training
With a team of approximately 124,000 employees across the United States, United Kingdom, and other
locations, we continue to make investments in our human resources (“HR”) organization and structure toward
centralized and standardized hiring and training practices, including incorporating modeling and advanced analytics
in our HR processes to drive improvement in the retention and engagement of our frontline employees, who
constitute the majority of our workforce.
In fiscal year 2021, we successfully piloted a frontline leadership training program, which we plan to formally
launch enterprise-wide. Through this program, we are aiming to develop the management and coaching skills of
frontline supervisors to improve the employee experience, create an environment for career growth, and increase
retention.
We also enhanced recruiting strategies to keep our client facilities staffed and improve our ability to hire in a
more efficient manner. Specifically, in fiscal year 2021, we introduced a rapid recruiting program that expands the
reach of our talent acquisition efforts through new processes, strategic solutions, and targeted marketing efforts to
better attract and retain talent.
Team Member Experience is one of the main pillars of our ELEVATE strategy. We plan to make significant
investments to attract, develop, and retain talent and to help our operators manage labor more efficiently, including
the development of a new applicant tracking system and enhanced workforce management tools.
Our online training platform, ABM University, provides our staff and management employees with access to
a multitude of training courses, videos, reference material, and other tools. Outside of ABM University our frontline
employees receive on-the-job training to ensure we are executing for our clients.
Compensation and employee benefits
In addition to competitive wages and salaries, we provide all of our employees access to a variety of health
and wellness benefits, including a 24/7 employee assistance program, as well as the addition of telemedicine
benefits and a dedicated COVID-19 employee resource site in response to the Novel Coronavirus (“COVID-19”)
Pandemic (the “Pandemic”). Our comprehensive benefits offerings are designed to meet the needs of our
employees.
Labor relations
With approximately 44,000 union-represented employees, we are party to more than 300 collective
bargaining agreements nationwide, with more than 20 major labor unions. Our collective bargaining agreements
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include regional multiemployer agreements covering thousands of employees as well as localized site agreements
covering smaller groups. We strive to interact with our labor partners in an atmosphere of mutual respect, and we
always seek to resolve any dispute in an equitable manner.
Safe working environment
The cornerstone of our comprehensive risk management and safety program is safety awareness. We have
established a “safety-first” culture through various programs and initiatives including, but not limited to, incorporation
into our daily shift protocols, training, and alignment with our corporate incentive plans. Our safety programs for
fiscal year 2021 helped produce claim frequency reductions.
A critical component of ABM’s commitment to fostering a professional and safe working environment for all
of our employees is our zero tolerance for sexual and other unlawful harassment. For example, in recent years, we
have taken actions to further strengthen our safeguards against harassment, including expanding our robust anti-
harassment trainings and policies. We take any claim of unlawful harassment seriously and remain committed to
providing a safe workplace for all.
Culture and inclusion
Grounded by our values and guided by our mission, we employ approximately 124,000 individuals from all
backgrounds with the talent, experience, and compassion that enable us to best deliver for those we serve. We
cultivate a culture aimed at ensuring that our employees feel seen, heard, and valued.
Diversity, inclusion, equity, and belonging are core to this culture. Inviting different perspectives and driving
inclusion enables us to connect meaningfully, adapt, and innovate. In 2020, we established the Company’s Culture
and Inclusion Leadership Council, supported by our executive leadership team and guided by our employees. This
council is focused on how ABM successfully converts its values into measurable action. In fiscal year 2021, through
meetings of this council and employees surveys and with the assistance of third-party experts, the council identified
four key focus areas, including: training, data and analytics, internal engagement, and partnering with respected
organizations dedicated to building a more equitable society.
Activities of the Culture and Inclusion Leadership Council are reported to the Board’s Stakeholder and
Enterprise Risk Committee through management presentations on matters such as corporate culture, diversity,
equity, and inclusion.
We are an Equal Opportunity and Affirmative Action employer in compliance with the requirements of the
Executive Order 11246 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans’ Readjustment Assistance
Act.
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Available Information
Our corporate website is www.abm.com. The content on any website referred to in this filing does not
constitute, and should not be viewed as, a part of this Annual Report, and our website is not incorporated into this or
any of our other filings with the Securities and Exchange Commission (“SEC”). We make available, free of charge
through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K, proxy statements, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 as soon as reasonably practicable after such reports are electronically filed with or
furnished to the SEC. Additionally, the SEC maintains a website at www.sec.gov that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the SEC.
Executive Officers of Registrant
Executive Officers on December 22, 2021
Name
Scott Salmirs
Age
59
Earl R. Ellis
Joshua H. Feinberg
Rene Jacobsen
Sean M. Mahoney
Andrea R. Newborn
Raúl Valentin
Dean A. Chin
56
47
60
55
58
58
53
Principal Occupations and Business Experience
President and Chief Executive Officer of ABM since March 2015; Executive
Vice President of ABM from September 2014 to March 2015, with global
responsibility for ABM’s Aviation division and all international activities;
Executive Vice President of ABM’s Onsite Services division focused on the
Northeast from 2003 to September 2014; Member of the Board of Directors of
ABM since January 2015.
Executive Vice President and Chief Financial Officer of ABM since November
2020; Senior Vice President, Finance and Procurement of Best Buy Co. Inc.
from January 2018 to November 2020; Chief Financial Officer of Best Buy
Canada from May 2016 to December 2017; Vice President, Finance, Retail of
Canadian Tire Corporation Limited from May 2014 to May 2016.
Executive Vice President, Chief Strategy and Transformation Officer of ABM
since November 2019; Managing Director and Partner of The Boston
Consulting Group from July 2014 to November 2019.
Executive Vice President and Chief Operating Officer of ABM since
November 2020; Executive Vice President and Chief Facilities Services
Officer of ABM from October 2019 to November 2020; President of ABM’s
Business & Industry Group from February 2016 to October 2019; Executive
Vice President of ABM’s West Region from April 2012 to February 2016;
Executive Vice President and Chief Operating Officer of Temco Service
Industries from November 2007 to April 2012.
Executive Vice President and President, Sales and Marketing of ABM since
November 2020; Senior Vice President, Sales of ABM from August 2017 to
October 2020; Vice President, Sales of Honeywell from July 2015 to July
2017.
Executive Vice President, General Counsel, and Corporate Secretary of ABM
since July 2017; Executive Vice President and General Counsel of
TravelClick, Inc. from July 2014 to June 21017; Senior Vice President,
General Counsel, and Secretary of The Reader’s Digest Association, Inc.
from March 2007 to February 2014.
Executive Vice President and Chief Human Resources Officer of ABM since
September 2021; Senior Vice President, Human Resources of ABM from
February 2019 to August 2021; Senior Vice President, Human Resources of
Coty Inc. from 2016 to 2018; Vice President, Human Resources of Comcast
Strategic & Business Development from 2015 to 2016; Vice President, Talent
Acquisition of Comcast from 2011 to 2015.
Treasurer of ABM since May 2021; Senior Vice President, Chief Accounting
Officer, and Corporate Controller of ABM since June 2010; Interim Chief
Financial Officer of ABM from July 2020 to November 2020; Vice President
and Assistant Controller of ABM from June 2008 to June 2010.
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ITEM 1A. RISK FACTORS.
The following risks, some of which have occurred and any of which may occur in the future, could materially
and adversely affect our business, financial condition, cash flows, results of operations, and/or the trading price of
our common stock. The risks described below identify the material risks we face; however, our business could also
be affected by factors that are not presently known to us or that we currently consider to be immaterial. You should
carefully consider the risks described below in addition to the other information set forth in this Annual Report on
including “Management’s Discussion and Analysis of Financial Condition and Results of
Form 10-K,
Operations” (“MD&A”) and the consolidated financial statements and accompanying notes (the “Financial
Statements”).
Risks Relating to the Pandemic
The Pandemic has had and is expected to continue having a negative effect on the global economy and the
United States economy. It has disrupted and is expected to continue disrupting our operations and our
clients’ operations, which may adversely affect our business, results of operations, cash flows, and
financial condition.
The Pandemic and measures taken by authorities in response to the Pandemic, such as travel bans and
restrictions, shelter-in-place/stay-at-home orders, and business and school shutdowns, have disrupted and are
expected to continue disrupting the economy and our business. These disruptions heighten the potential adverse
effects on our business, financial condition, results of operations, and cash flows that are described in certain of the
risk factors described below. The evolving scale and scope of the Pandemic will affect the degree of these adverse
effects, including, but not limited to, the likelihood of and impacts from:
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overall economic conditions, which have been and will likely continue to be adversely impacted by the
Pandemic and related shutdowns;
our ability to maintain sufficient key personnel due to employee illness, quarantine requirements, vaccine
requirements, worker absences, social-distancing requirements, and travel or other restrictions;
reduced availability and productivity of labor;
continued or expanded closures of our clients’ facilities;
our clients’ demand and ability to pay for our services, or attempts by our clients to defer payments owed to
us;
our ability to obtain new clients, expand, or otherwise execute strategic plans;
our ability to comply with new legal or regulatory requirements enacted in connection with the Pandemic;
legal actions or proceedings related to the Pandemic; and
the ability of third parties on which we rely, including our suppliers, to timely meet their obligations to us, or
significant disruptions in their ability to do so.
The extent of the impact of the Pandemic depends on future developments and remains highly uncertain
due to the unknown duration and severity of the Pandemic. Given these uncertainties, we cannot estimate the full
impacts the Pandemic will have on our business, results of operations, cash flows, or financial condition, but the
adverse impacts could be material.
Risks Relating to Our Strategy and Operations
Our success depends on our ability to gain profitable business despite competitive market pressures.
Each aspect of our business is highly competitive and such competition is based primarily on price, quality
of service, and ability to anticipate and respond to industry changes. A majority of our revenue is derived from
services that require competitive bids. The low cost of entry in the facility services business results in a very
competitive market. We compete mainly with regional and local owner-operated companies that may have more
acute vision into local markets and significantly lower labor and overhead costs, providing them with a competitive
advantage in those regards. We also compete indirectly with companies that can perform for themselves one or
more of the services we provide. Further, if we are unable to respond adequately to changing technology, we may
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lose existing clients and fail to win future business opportunities. A failure to respond effectively to competitive
pressures or failure in our ability to increase prices as costs rise could reduce margins and materially adversely
affect our financial performance.
Our business success depends on our ability to attract and retain qualified personnel and senior
management and to manage labor costs.
Our future performance depends on the continuing services and contributions of our senior management
and on our continued ability to attract and retain qualified personnel. Any unplanned turnover in senior management
or inability to attract and retain qualified personnel could have a negative effect on our results of operations. We
employ approximately 124,000 persons, and our operations depend on the services of a large and diverse
workforce. We must attract, train, and retain a large and growing number of qualified employees while controlling
related labor costs. Our ability to control labor and benefit costs is subject to numerous internal and external factors,
including changes in the unemployment rate, changes in immigration policy, regulatory changes, prevailing wage
rates, and competition we face from other companies for qualified employees. During 2021, we experienced an
overall tightening and increasingly competitive labor market. This was attributed to, among other things, increased
federal unemployment subsidies, including unemployment benefits offered in response to the ongoing Pandemic,
and other government regulations. A sustained labor shortage could lead to increased costs, such as increased
overtime incurred to meet the demands of our customers and increased wage rates to attract and retain employees.
Further, many of our contracts provide that our clients pay certain costs at specified rates, such as insurance,
healthcare costs, salary and salary-related expenses, and other costs. If actual costs exceed the rates specified in
the contracts, our profitability may be negatively impacted. There is no assurance that in the future we will be able to
attract or retain qualified employees or effectively manage labor and benefit costs, which could have a material
adverse effect on our business, financial condition, and results of operations.
Investments in and changes to our businesses, operating structure, financial reporting structure, or
personnel relating to our ELEVATE strategy, including the implementation of strategic transformations,
enhanced business processes, and technology initiatives, may not have the desired effects on our financial
condition and results of operations.
We have made and expect to continue to make significant investments in various initiatives intended to
drive long-term profitable growth and increase operational efficiency. These investments in and changes to our
business systems and processes may not create the growth, operational efficiencies, competitive advantage, or
cost benefits that we expect and could result in unanticipated consequences, including substantial disruption to our
back-office operations and service delivery. Moreover, the execution of our ELEVATE strategy may result in
substantial expenses in excess of what is currently forecast. While we anticipate that certain expenses will be
incurred, such expenses are difficult to estimate accurately and may exceed current estimates.
Our ability to preserve long-term client relationships is essential to our continued success.
We primarily provide services pursuant to agreements that are cancelable by either party upon 30 to 90
days’ notice. As we generally incur higher initial costs on new contracts until the labor management and facilities
operations normalize, our business associated with long-term client relationships is generally more profitable than
short-term client relationships. If we lose a significant number of long-term clients, our profitability could be
negatively impacted, even if we gain equivalent revenues from new clients.
We depend to a large extent on our relationships with clients and our reputation for quality integrated facility
solutions. Maintaining our existing client relationships is an important factor contributing to our business success.
Among other things, adverse publicity stemming from an accident or other incident involving our facility operations
or employees related to injury, illness, death, or alleged criminal activity could harm our reputation, result in the
cancellation of contracts or inability to retain clients, and expose us to significant liability.
Our international business involves risks different from those we face in the United States that could have
an effect on our results of operations and financial condition.
We have business operations in jurisdictions outside of the United States, most significantly in the United
Kingdom. Our international operations are subject to risks that are different from those we face in the United States
and subject us to complex and frequently changing laws and regulations, including differing labor laws and
regulations relating to the protection of certain information that we collect and maintain about our employees,
clients, and other third parties. Among these laws is the U.K. Modern Slavery Act, the U.K. Bribery Act, and the
European Union General Data Protection Regulation (the “GDPR”), which took effect in May 2018. The failure to
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comply with these laws or regulations could subject us to significant litigation, monetary damages, regulatory
enforcement actions, or fines in one or more jurisdictions. More generally, the economic, political, monetary, and
operational impacts of Brexit, including unanticipated impacts to the U.K. real estate market and general economic
conditions in the United Kingdom, could negatively impact our U.K. business, including reducing our margins.
In addition, when we participate in joint ventures that operate outside of the United States where we are not
a controlling party, we may have limited control over the joint venture. Any improper actions by our joint venture
employees, partners, or agents, including, but not limited to, failure to comply with the U.S. Foreign Corrupt
Practices Act, the U.K. Bribery Act, and/or laws relating to human trafficking, could result in civil or criminal
investigations, monetary and non-monetary penalties, or other consequences, any of which could have an adverse
effect on our financial position as well as on our reputation and ability to conduct business.
Additionally, the operating results of our non-U.S. subsidiaries are translated into U.S. dollars, and those
translations are affected by movements in foreign currencies relative to the U.S. dollar. There can be no assurance
that the foregoing factors will not have a material adverse effect on our international operations or on our
consolidated financial condition and results of operations.
Our use of subcontractors or joint venture partners to perform work under customer contracts exposes us
to liability and financial risk.
We depend on subcontractors or other parties, such as joint venture partners, to perform work in situations
in which we are not able to self-perform the work involved. Such arrangements may involve subcontracts or joint
venture relationships where we do not have direct control over the performing party. We may be exposed to liability
whenever one or more of our subcontractors or joint venture partners, for whatever reason, fails to perform or
allegedly negligently performs the agreed-upon services. Although we have in place controls and programs to
monitor the work of our subcontractors and our joint venture partners, there can be no assurance that these controls
or programs will have the desired effect, and we may incur significant liability as a result of the actions or inactions
of one or more of our subcontractors or joint venture partners.
Risks Relating to Acquisitions, Including the Able Acquisition, and Relating to Divestitures, or Strategic
Transactions
Acquisitions, divestitures, and other strategic transactions could fail to achieve financial or strategic
objectives, disrupt our ongoing business, and adversely impact our results of operations.
In furtherance of our business strategy, we routinely evaluate opportunities and may enter into agreements
for possible acquisitions, divestitures, or other strategic transactions. In the past, a significant portion of our growth
has been generated by acquisitions, and we may continue to acquire businesses in the future as part of our growth
strategy. However, we may encounter challenges identifying opportunities in a timely manner or on terms
acceptable to us. Furthermore, there is no assurance that any such transaction will result in synergistic benefits. A
potential acquisition, divestiture, or other strategic transaction may involve a number of risks including, but not
limited to:
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•
•
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the transaction may not effectively advance our business strategy, and its anticipated benefits may never
materialize;
our ongoing operations may be disrupted, and management time and focus may be diverted;
clients or key employees of an acquired business may not remain, which could negatively impact our ability
to grow that acquired business;
integration of an acquired business’s accounting, information technology, HR, and other administrative
systems may fail to permit effective management and expense reduction;
unforeseen challenges may arise in implementing internal controls, procedures, and policies;
additional indebtedness incurred as a result of an acquisition may impact our financial position, results of
operations, and cash flows; and
unanticipated or unknown liabilities may arise related to an acquired business.
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We may experience difficulties integrating Able and may not realize the growth opportunities and cost
synergies that are anticipated from the Able Acquisition
There is a significant degree of difficulty, management distraction, and expense inherent in the process of
integrating an acquisition as sizable as Able. The process of integrating Able could cause an interruption of, or loss
of momentum in, our activities, including with respect to our ELEVATE program or the activities of the Able
business. Members of our senior management may be required to devote considerable time to this integration
process, which will decrease the time they will have to manage our Company, service existing clients, and attract
new clients. If senior management is not able to effectively manage the integration process, or if any significant
business activities are interrupted as a result of the integration process, our business could suffer.
Additionally, the benefits that are expected to result from the Able Acquisition will depend, in part, on our
ability to realize the anticipated growth opportunities and cost synergies as a result of the Able Acquisition. Our
success in realizing these growth opportunities and cost synergies, and the timing of this realization, depends on
successful integration and a number of other factors. Even if we integrate Able successfully, this integration may not
result in the realization of the full benefits of the growth opportunities and cost synergies we currently expect from
the integration, and we cannot guarantee these benefits will be achieved within anticipated time frames or at all. For
example, we may not be able to eliminate duplicative costs, and while it is anticipated that certain expenses will be
incurred to achieve cost synergies, such expenses are difficult to estimate accurately and may exceed current
estimates. Accordingly, the benefits from the Able Acquisition may be offset by costs incurred to integrate the
business or delays in the integration process. In addition, the overall integration of Able with ABM may result in
unanticipated problems, expenses, liabilities, competitive responses, loss of client and other relationships, and loss
of key employees, any of which may adversely affect our results of operations, financial condition, and cash flow,
and may cause our stock price to decline.
Risks Relating to Insurance and Safety Matters
We manage our insurable risks through a combination of third-party purchased policies and self-insurance,
and we retain a substantial portion of the risk associated with expected losses under these programs,
which exposes us to volatility associated with those risks, including the possibility that changes in
estimates to our ultimate insurance loss reserves could result in material charges against our earnings.
We use a combination of insured and self-insurance programs to cover workers’ compensation, general
liability, automobile liability, property damage, and other insurable risks. We are responsible for claims both within
and in excess of our retained limits under our insurance policies, and while we endeavor to purchase insurance
coverage that is appropriate to our assessment of risk, we are unable to predict with certainty the frequency, nature,
or magnitude of claims for direct or consequential damages. If our insurance coverage proves to be inadequate or
unavailable, our business may be negatively impacted.
The determination of required insurance reserves is dependent upon actuarial judgments. We use the
results of actuarial studies to estimate insurance rates and insurance reserves for future periods and to adjust
reserves, if appropriate, for prior years. Actual experience related to our insurance reserves can cause us to change
our estimates for reserves and any such changes may materially impact results, causing significant volatility in our
operating results.
Should we be unable to renew our excess, umbrella, or other commercial insurance policies, it could have a
material adverse impact on our business, as would the incurrence of catastrophic uninsured claims or the inability or
refusal of our insurance carriers to pay otherwise insured claims. Further, to the extent that we self-insure our
losses, deterioration in our loss control and/or our continuing claim management efforts could increase the overall
cost of claims within our retained limits. A material change in our insurance costs due to changes in the frequency of
claims, the severity of the claims, the costs of excess/umbrella premiums, or regulatory changes could have a
material adverse effect on our financial position, results of operations, or cash flows.
In 2015, we formed a wholly owned captive insurance company, IFM Assurance Company (“IFM”), which
we believe has provided us with increased flexibility in the end-to-end management of our insurance program.
There can be no assurance that IFM will continue to bring about the intended benefits or the desired flexibility in the
management of our insurance programs, because we may experience unanticipated events that could reduce or
eliminate expected benefits.
13
Our risk management and safety programs may not have the intended effect of reducing our liability for
personal injury or property loss.
We attempt to mitigate risks relating to personal injury or property loss through the implementation of
company-wide safety and loss control efforts designed to decrease the incidence of accidents or events that might
increase our liability. It is expected that any such decrease could also have the effect of reducing our insurance
costs for our casualty programs. However, incidents involving personal injury or property loss may be caused by
multiple potential factors, a significant number of which are beyond our control. Therefore, there can be no
assurance that our risk management and safety programs will have the desired effect of controlling costs and
liability exposure.
Risks Relating to Information Technology and Cybersecurity
We may experience breaches of, or disruptions to, our information technology systems or those of our
third-party providers or clients, or other compromises of our data that could adversely affect our business.
Our information technology systems and those of our third-party providers or clients could be the target of
cyberattacks, ransomware attacks, hacking, unauthorized access, phishing, computer viruses, malware, or other
intrusions, which could result in operational disruptions or information misappropriation, such as theft of intellectual
property or inappropriate disclosure of confidential, proprietary, or personal information. We maintain confidential,
proprietary, and personal information in our information technology systems and in systems of third-party providers
relating to our current, former, and prospective employees, clients, and other third parties. We have experienced
certain data and security breaches in the past and could experience future data or security breaches stemming from
the intentional or negligent acts of our employees or other third parties. Furthermore, while we continue to devote
significant resources to monitoring and updating our systems and implementing information security measures to
protect our systems, there can be no assurance that the controls and procedures we have in place will be sufficient
to protect us from future security breaches. As cyber threats are continually evolving, our controls and procedures
may become inadequate and we may be required to devote additional resources to modifying or enhancing our
systems in the future. We may also be required to expend resources to remediate cyber-related incidents or to
enhance and strengthen our cybersecurity.
Any such disruptions to our information technology systems, breaches or compromises of data, and/or
misappropriation of information could result in lost sales, negative publicity, litigation, violations of privacy and other
laws, or business delays that could have a material adverse effect on our business. Additionally, we believe that
along with the GDPR and the California Consumer Privacy Act, which went into effect on January 1, 2020, further
increased regulation is likely in the area of data privacy. Compliance with this rapidly expanding area of law will
require significant management and financial resources, and we could be subjected to additional legal risk or
financial losses if we are not in compliance. This expanding area of law may also lead to potentially significant
additional claims, including class action claims, being alleged against us.
Risks Relating to Labor, Legal Proceedings, Tax, and Regulatory Matters
Unfavorable developments in our class and representative actions and other lawsuits alleging various
claims could cause us to incur substantial liabilities.
Our business involves employing tens of thousands of employees, many of whom work at our clients’
facilities. We incur risks relating to our employment of these workers, including, but not limited to: claims by our
employees of discrimination, harassment, violations of wage and hour requirements, or violations of other federal,
state, or local laws; claims of misconduct or negligence on the part of our employees; and claims related to the
employment of unlicensed personnel. We also incur risks and claims related to the imposition on our employees of
policies or practices of our clients that may be different from our own. Some or all of these claims may lead to
litigation, including class action litigation, and these matters may cause us to incur negative publicity with respect to
alleged claims. Additionally, there are risks to all employers in some states, such as California, resulting from new
and unanticipated judicial interpretations of existing laws and the application of those new interpretations against
employers on a retroactive basis. It is not possible to predict the outcome of these lawsuits or any other proceeding,
and our insurance may not cover all claims that may be asserted against us. These lawsuits and other proceedings
may consume substantial amounts of our financial and managerial resources. An unfavorable outcome with respect
to current lawsuits, including the Bucio case described in Note 13, “Commitments and Contingencies,” in the Notes
to consolidated financial statements (included in Part II., Item 8 of this Form 10-K), and any future lawsuits may,
individually or in the aggregate, cause us to incur substantial liabilities that could have a material adverse effect
upon our business, reputation, financial condition, results of operations, or cash flows.
14
A significant number of our employees are covered by collective bargaining agreements that could expose
us to potential liabilities in relation to our participation in multiemployer pension plans, requirements to
make contributions to other benefit plans, and the potential for strikes, work slowdowns or similar
activities, and union organizing drives.
We participate in various multiemployer pension plans that provide defined pension benefits to employees
covered by collective bargaining agreements. Because of the nature of multiemployer pension plans, there are risks
to us associated with participation in these plans that differ from single-employer plans. Assets contributed by an
employer to a multiemployer pension plan are not segregated into a separate account and are not restricted to
provide benefits only to employees of that contributing employer. In the event another participating employer in a
multiemployer pension plan no longer contributes to the plan, the unfunded obligations of the plan may be borne by
the remaining participating employers, including us. In the event of the termination of a multiemployer pension plan
or a complete or partial withdrawal from a multiemployer pension plan, under applicable law we could incur material
withdrawal liabilities. We further discuss our participation in multiemployer pension and postretirement plans in Note
12, “Employee Benefit Plans,” in the Notes to consolidated financial statements. In addition, the terms of collective
bargaining agreements require us to contribute to various fringe benefit plans, including health and welfare,
pension, and training plans, all of which require us to have appropriate systems in place to assure timely and
accurate payment of contributions. The failure to make timely and accurate contributions as a result of a systems
failure could have a negative impact on our financial position.
At October 31, 2021, approximately 35% of our employees were subject to various local collective
bargaining agreements, some of which will expire or become subject to renegotiation during 2022. In addition, at
any given time we may face union organizing activity. When one or more of our major collective bargaining
agreements becomes subject to renegotiation or when we face union organizing drives, any disagreement between
us and the union on important issues may lead to a strike, work slowdown, or other job actions at one or more of our
locations. In a market where we are unionized but competitors are not unionized, we could lose clients to such
competitors. A strike, work slowdown, or other job action could disrupt our services, resulting in reduced revenues or
contract cancellations. Moreover, negotiating a first time collective bargaining agreement or renegotiating an
existing agreement could result in a substantial increase in labor and benefits expenses that we may be unable to
pass through to clients.
Our business may be materially affected by changes to fiscal and tax policies. Negative or unexpected tax
consequences could adversely affect our results of operations.
We are subject to a variety of taxes and tax collection and remittance obligations in the United States and
foreign jurisdictions, primarily the United Kingdom. We compute our income tax provision based on enacted tax
rates in the jurisdictions in which we operate. As tax rates vary among taxing jurisdictions, a change in earnings
attributable to the various jurisdictions in which we operate could result in an unfavorable change in our overall tax
provision. Additionally, at any point in time, we may be under examination for income-based, sales-based, payroll, or
other non-income taxes. We regularly assess the likelihood of adverse outcomes resulting from these audits to
determine the adequacy of our provision for income taxes. We may recognize additional tax expense, be subject to
additional tax liabilities, or incur losses and penalties due to adverse outcomes in tax audits or changes in laws,
regulations, administrative practices, principles, assessments by authorities, and interpretations related to tax laws,
including tax rules in various jurisdictions, which could have an adverse effect on our operating results and financial
condition.
Risks Relating to Market and Economic Conditions
Changes in general economic conditions, such as changes in energy prices, government regulations, or
consumer preferences, could reduce the demand for facility services and, as a result, reduce our earnings
and adversely affect our financial condition.
In certain geographic areas and service lines, our most profitable revenues are related to supplemental
services requested by clients outside of the standard service specification (“work orders”). This contract type is
commonly used in janitorial services and includes cleanup after tenant moves, construction cleanup, flood cleanup,
and snow removal. A continuing decline in occupancy rates could result in a decline in scope of work, including work
orders, and depressed prices for our services. Slow domestic and international economic growth or other negative
changes in global, national, and local economic conditions could have a negative impact on our business.
Specifically, adverse economic conditions may result in clients cutting back on discretionary spending. Additionally,
since a significant portion of our aviation services and parking revenues are tied to the volume of airline passengers,
15
hotel guests, and sports arena attendees, results for these businesses could be adversely affected by continued
curtailment of business, personal travel, or discretionary spending. The use of ride sharing services and car sharing
services may also lead to a decline in parking demand at airports and in urban areas.
Energy efficiency projects are designed to reduce a client’s overall consumption of commodities, such as
electricity and natural gas. As such, downward fluctuations in commodity prices may reduce client demand for those
projects. We also depend, in part, on federal and state legislation and policies that support energy efficiency
projects. If current legislation or policies are amended, eliminated, or not extended beyond their current expiration
dates, or if funding for energy incentives is reduced or delayed, it could also adversely affect our ability to obtain
new business. In some instances, we offer certain of these clients guaranteed energy savings on installed
equipment. In the event those guaranteed savings are not achieved, we may be required to pay liquidated or other
damages. All of these factors could have an adverse effect on our financial position, results of operations, and cash
flows.
Risks Relating to Financial Matters
Future increases in the level of our borrowings or in interest rates could affect our results of operations.
Although we have paid down portions of our indebtedness under our syndicated secured credit facility, our
future ability to make payments on our debt, fund our other liquidity needs, and make planned capital expenditures
will depend on our ability to generate cash. Our ability to generate cash, to a certain extent, is subject to general
economic, financial, competitive, and other factors that are beyond our control. We cannot guarantee that our
business will generate sufficient cash flow from our operations or that future borrowings will be available to us in an
amount sufficient to enable us to make payments on our debt, fund other liquidity needs, make planned capital
expenditures, or continue our dividend.
The degree to which we are leveraged could have important consequences for shareholders. For example,
being highly leveraged could: require us to dedicate a substantial portion of our cash flows from operations to the
payment of debt service, reducing the availability of our cash flow to fund working capital, share repurchases,
capital expenditures, acquisitions, and other general corporate purposes; limit our availability to obtain additional
financing in the future to enable us to react to changes in our business; and place us at a competitive disadvantage
compared to businesses in our industry that have less debt.
Additionally, any future increase in the level of our indebtedness will likely increase our interest expense,
which could negatively impact our profitability. Current interest rates on borrowings under our credit facility are
variable and include the use of the London Interbank Offered Rate (“LIBOR”). On March 5, 2021, the U.K. Financial
Conduct Authority, the regulator of LIBOR, announced that the USD LIBOR rates will no longer be published after
June 30, 2023. While we expect LIBOR to be available in substantially its current form until at least the end of June
30, 2023, it is possible that LIBOR will become unavailable prior to that point which may impact our credit facility
and interest rate swaps. Our current credit agreement as well as our International Swaps and Derivatives
Association, Inc. agreement provide for any changes away from LIBOR to a successor rate to be based on
prevailing or equivalent standards, however, the discontinuation, reform, or replacement of LIBOR or any other
benchmark rates may result in fluctuating interest rates that may have a negative impact on our interest expense
and our profitability.
Further, our credit facility contains both financial covenants and other covenants that limit our ability to
engage in specific transactions. Any failure to comply with covenants in the credit facility could result in an event of
default that, if not cured or waived, would have a material adverse effect on us.
Impairment of goodwill and long-lived assets could have a material adverse effect on our financial condition
and results of operations.
We evaluate goodwill for impairment annually, in the fourth quarter, or more often if impairment indicators
exist. We also review long-lived assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of such assets may not be recoverable. If the fair value of one of our reporting units is less than
its carrying value, or if as a result of a recoverability test we conclude that the projected undiscounted cash flows
are less than the carrying amount, we would record an impairment charge related to goodwill or long-lived assets,
respectively. (For example, during the second quarter of 2020, given the general deterioration in economic and
market conditions arising from the Pandemic, we identified a triggering event that resulted in the impairment of
goodwill and intangible assets.) The assumptions used to determine impairment require significant judgment, and
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the amount of the impairment could have a material adverse effect on our reported financial results for the period in
which the charge is taken.
If we fail to maintain proper and effective internal control over financial reporting in the future, our ability to
produce accurate and timely financial statements could be negatively impacted, which could harm our
operating results and investor perceptions of our Company and as a result may have a material adverse
effect on the value of our common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and related rules, our management is required
to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our
internal control over financial reporting. The rules governing the standards that must be met for management to
assess our internal control over financial reporting are complex and require significant documentation, testing, and,
in some instances, remediation. We have acquired entities that had no publicly traded debt or equity and therefore
were not previously required to conform to the rules and regulations of the SEC, especially related to their internal
control structure. When we acquire such entities, they may not have in place all the necessary controls as required
by the Public Company Accounting Oversight Board. Integrating acquired entities into our internal control over
financial reporting has required and will continue to require significant time and resources from our management
and other personnel, which increases our compliance costs. We are required to include our assessment of the
effectiveness of the internal controls over financial reporting of entities we acquire in our overall assessment, so we
must plan to complete the evaluation and integration of internal controls over financial reporting and report our
assessment within the required time frame.
In addition, with the increasing frequency of cyber-related frauds perpetrated to obtain inappropriate
payments, we need to ensure our internal controls related to authorizing the transfer of funds and changing our
vendor master files are adequate. Furthermore, the introduction of new, and changes to existing, enterprise
resource planning (“ERP”) and financial reporting information systems create implementation and change
management risks that require effective internal controls to mitigate. Failure to maintain an effective internal control
environment could have a material adverse effect on our ability to accurately report our financial results, the
market’s perception of our business, and our stock price.
General Risk Factors
Our business may be negatively impacted by adverse weather conditions.
Weather conditions such as snow storms, heavy flooding, hurricanes, and fluctuations in temperatures can
negatively impact portions of our business. Within our Technical Solutions segment, cooler than normal
temperatures in the summer could reduce the need for servicing of air conditioning units, resulting in reduced
revenues and profitability. Within Parking and Aviation services, snow can lead to reduced travel activity, as well as
increases in certain costs, both of which negatively affect gross profit. On the other hand, the absence of snow
during the winter could cause us to experience reduced revenues in our B&I segment, as many of our contracts
specify additional payments for snow-related services.
Catastrophic events, disasters, and terrorist attacks could disrupt our services.
We may encounter disruptions involving power, communications, transportation or other utilities, or
essential services depended upon by us or by third parties with whom we conduct business. This could include
disruptions due to disasters, pandemics, weather-related or similar events (such as fires, hurricanes, blizzards,
earthquakes, and floods), political instability, labor strikes, or war (including acts of terrorism or hostilities) that could
impact our markets. If a disruption occurs in one location and persons in that location are unable to communicate
with or travel to or work from other locations, our ability to service and interact with our clients and others may suffer,
and we may not be able to successfully implement contingency plans that depend on communications or travel.
These events may increase the volatility of financial results due to unforeseen costs with partial or no corresponding
compensation from clients. There also can be no assurance that the disaster recovery and crisis management
procedures we employ will suffice in any particular situation to avoid a significant loss. In addition, to the extent
centralized administrative locations are disabled for a long period of time, key business processes, such as
accounts payable, information technology, payroll, and general management operations, could be interrupted.
Actions of activist investors could disrupt our business.
Public companies have been the target of activist investors. In the event that a third party, such as an
activist investor, proposes to change our governance policies, board of directors, or other aspects of our operations,
17
our review and consideration of such proposals may create a significant distraction for our management and
employees. This could negatively impact our ability to execute various strategic initiatives and may require
management to expend significant time and resources responding to such proposals. Such proposals may also
create uncertainties with respect to our financial position and operations and may adversely affect our ability to
attract and retain key employees.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
18
ITEM 2. PROPERTIES.
Our principal executive office is located at One Liberty Plaza, 7th Floor, New York, New York 10006.
Principal Properties as of October 31, 2021
Approximate
Square Feet
Lease Expiration
Date, Unless
Owned
Location
Character of Office
Alpharetta, Georgia
IT Datacenter and
Technical Solutions
Headquarters
Atlanta, Georgia
Operations Support
Cleveland, Ohio
New York, New York
Legacy GCA
Headquarters
Corporate
Headquarters
Sugar Land, Texas
Enterprise Services
Tustin, California
Operations Support
25,000
37,000
32,400
44,000
62,500
40,000
Owned
10/31/2027
1/31/2024
Segment
All
All
Education, T&M, and
Corporate
1/3/2032
Corporate and B&I
3/31/2028
7/31/2029
All
B&I and Technical
Solutions
In addition to the above properties, we have other offices, warehouses, and parking facilities in various
locations, primarily in the United States. See Note 5, “Leases,” in the Notes to consolidated financial statements for
additional information regarding leases. We believe that these properties are well maintained, in good operating
condition, and suitable for the purposes for which they are used.
ITEM 3. LEGAL PROCEEDINGS.
Certain Legal Proceedings
Information with respect to certain legal proceedings is set forth in Note 13, “Commitments and
Contingencies,” in the Notes to consolidated financial statements (included in Part II., Item 8 of this Form 10-K) and
is incorporated herein by reference.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
19
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information, Dividends, and Stockholders
Our common stock is listed on the New York Stock Exchange (NYSE: ABM). We have paid cash dividends
every quarter since 1965. Future dividends will be determined based on our earnings, capital requirements, financial
condition, and other factors considered relevant by our Board of Directors.
At December 21, 2021, there were 3,056 registered holders of our common stock.
Common Stock Repurchases
Effective December 18, 2019, our Board of Directors replaced our then-existing share repurchase program
with a new share repurchase program under which we may repurchase up to $150.0 million of our common stock
(the “2019 Share Repurchase Program”). These purchases may take place on the open market or otherwise, and all
or part of the repurchases may be made pursuant to Rule 10b5-1 plans or in privately negotiated transactions. The
timing of repurchases is at our discretion and will depend upon several factors, including market and business
conditions, future cash flows, share price, share availability, and other factors at our discretion. Repurchased shares
are retired and returned to an authorized but unissued status. However, due to the market and business conditions
arising from the Pandemic, we suspended further repurchases of our common stock in March 2020 and did not
repurchase any shares of our outstanding common stock during fiscal year 2021. At October 31, 2021, authorization
for $144.9 million of repurchases remained under the 2019 Share Repurchase Program.
20
Performance Graph
The following graph compares the five-year cumulative total return for our common stock against the
Standard & Poor’s 500 Index (“S&P 500”) and the Standard & Poor’s SmallCap 600 Index (“S&P 600”). As our
competitors are principally privately held, we do not believe it is feasible to construct a peer group comparison on an
industry or line-of-business basis.
INDEXED RETURNS
Years Ended October 31,
Company / Index
ABM Industries Incorporated
S&P 500 Index
S&P SmallCap 600 Index
2016
2017
2018
2019
2020
2021
$
100 $
100
100
109.2 $
123.6
127.9
81.7 $
98.8 $
96.3 $
132.7
135.1
151.7
139.5
166.5
128.7
124.1
237.9
204.6
This performance graph shall not be deemed to be “soliciting material” or “filed” with the SEC, or subject to
Regulation 14A or 14C, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as
amended. The comparisons in the performance graph are based on historical data and are not indicative of, or
intended to forecast, the possible future performance of our common stock.
21
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following MD&A is intended to facilitate an understanding of the results of operations and financial
condition of ABM. This MD&A is provided as a supplement to, and should be read in conjunction with, our Financial
Statements. This MD&A contains both historical and forward-looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995, that involve risks and uncertainties. We make forward-looking statements
related to future expectations, estimates, and projections that are uncertain and often contain words such as
“anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “outlook,” “plan,” “predict,”
“should,” “target,” or other similar words or phrases. These statements are not guarantees of future performance
and are subject to known and unknown risks, uncertainties, and assumptions that are difficult to predict. Factors that
might cause such differences include, but are not limited to, those discussed in Part 1. of this Form 10-K under Item
1A., “Risk Factors,” which are incorporated herein by reference. Our future results and financial condition may be
materially different from those we currently anticipate. Throughout the MD&A, amounts and percentages may not
recalculate due to rounding. Unless otherwise indicated, all information in the MD&A and references to years are
based on our fiscal year, which ends on October 31.
Business Overview
ABM is a leading provider of integrated facility solutions, customized by industry, with a mission to make a
difference, every person, every day. Our principal operations are in the United States, and in 2021 our U.S.
operations generated approximately 94% of our revenues.
Strategic Growth
We remain focused on long-term, profitable growth by delivering valued service offerings to both new and
existing clients within our industry groups and across our many service lines. Our revenue growth strategy is
predicated on pursuing new sales and targeting a favorable retention rate among existing contracts. Cross-selling
and up-selling projects and services is also an integral part of our strategy. We believe our strategic growth
initiatives, coupled with our continued focus on marketing, capital, and sales resources, will increase profitability.
ELEVATE Transformation
Through our ELEVATE strategy, as described in Item 1., “Business.,” we plan to primarily focus our efforts
on:
•
•
•
the client experience, by enhancing service delivery through the development of a new workforce
management platform with modern timekeeping, scheduling, and forecasting modules to create a digital
connection with our workforce;
the team member experience, by investing in development programs, talent acquisition tools, and training;
and
the use of technology and data in our systems, tools, business processes, and operating models.
We believe that our technology and data investments will enable: the development and deployment of
client-facing technology to improve service delivery to our clients; the use of advanced data analytics for sales
targeting, team member retention, and recruiting; and the upgrade of our Enterprise Resource Planning and payroll
systems.
22
Developments and Trends
COVID-19 Pandemic
COVID-19 has resulted in a worldwide health Pandemic. To date, COVID-19 has surfaced in regions all
around the world and resulted in business slowdowns and shutdowns, as well as global travel restrictions. We,
along with many of our clients, have been impacted by recommendations and/or mandates from federal, state, and
local authorities to practice social distancing, to refrain from gathering in groups, and, in some areas, to refrain from
non-essential movements outside of homes. The Pandemic has also created unanticipated circumstances and
uncertainty, disruption, and significant volatility in the broader economy. These factors have led to lower demand for
some of our services in certain end-markets, particularly in our Aviation segment. Refer to “Consolidated Results of
Operations” and “Results of Operations by Segment” for additional information related to the impact of the
Pandemic on our financial results.
Given the unprecedented and uncertain nature and potential duration of this situation, we cannot
reasonably estimate the full extent of the impact the Pandemic will have on our financial condition, results of
operations, or cash flows. The ultimate extent of the effects of the Pandemic on our company is highly uncertain and
will depend on future developments, and we may continue to experience adverse effects on our business,
consolidated results of operations, financial position, and cash flows resulting from a recessionary economic
environment that may persist.
Our priority has been and continues to be the health, safety, and support of our employees, our clients, and
the communities that we serve. We have also taken actions to strengthen our liquidity, cash flows, and financial
position to help mitigate potential future impacts on our operations and financial performance. These priorities and
measures include, but are not limited to, the following:
Health and Safety of our Employees and Clients
As the Pandemic has developed, we have taken steps to support our employees and clients based
on recommendations from various global experts, including the World Health Organization, the Centers for
Disease Control and Prevention, the Occupational Safety and Health Administration, and the U.K. National
Health Service. To help protect our employees and our clients, face masks and other personal protective
equipment (“PPE”) are being used by our employees. We have also encouraged our employees to practice
social distancing and wash hands frequently. Additionally, we transitioned many office-based employees to
a remote work environment, suspended non-essential travel, and adopted technologies to allow employees
to effectively perform their functions remotely.
Client Focus
Over the past few years, we have focused on consolidating purchasing activities to leverage our
scale and identify preferred suppliers. While we have seen a reduction in the availability of supplies and an
increase in costs, our procurement efforts have helped create a positive supply chain for our company and
clients during the Pandemic. We will continue to monitor our supply chain for potential impacts as future
developments unfold.
The Pandemic continues to create a dynamic client environment, and we are working diligently to
ensure our clients’ changing staffing and service needs are met. We developed new cleaning initiatives in
accordance with various protocols issued by global experts, including deep cleaning services, special
project cleaning services, and other work orders.
In April 2020, we announced our EnhancedCleanTM Program (“EnhancedClean”), an innovative
solution that helps provide clients with healthy spaces. We designed EnhancedClean under the guidance of
experts on infectious diseases and industrial hygiene to help provide our clients with processes that use
hospital-grade disinfectants, specialized equipment, and innovative solutions and technology. These
solutions include: hygiene and safety protocols, utilization of disinfecting procedures and products for high-
touch surfaces, employment of PPE, and communication and training protocols.
Management of Direct Labor
As we adapt to the changing demand environment resulting from the Pandemic, we continue to
actively manage direct labor and related personnel costs, including furloughs or reduced hours for certain
frontline employees in markets significantly impacted by business slowdowns and shutdowns.
23
Liquidity, Cash Flows, and Financial Position
We have taken and continue to take actions to help preserve cash, increase liquidity, and
strengthen our financial position, including:
•
•
•
•
Amending our credit facility on June 28, 2021, to increase our borrowing capacity and further
enhance our financial flexibility (refer to “Liquidity and Capital Resources” for more information);
Focusing on collection of client receivables and monitoring the adequacy of our reserves;
Extending vendor payment terms where possible; and
Utilizing certain governmental relief efforts (as further described below).
In response to the Pandemic, Congress enacted the Coronavirus Aid, Relief, and Economic
Security Act (“CARES Act”) on March 27, 2020. The CARES Act provides various stimulus measures,
including several income tax and payroll tax provisions. Among the payroll tax provisions is the creation of a
refundable credit for employee retention and the deferral of certain payroll tax remittances through
December 31, 2020, to future years (with 50% of the deferred amount due by December 31, 2021, and the
remaining 50% due by December 31, 2022). We evaluated the impact of business tax provisions in the
CARES Act and determined the impact of the income tax provisions is not material. The impact of the
payroll tax provisions was the deferral of approximately $132 million of payroll tax as of October 31, 2021.
Additionally, we received grants under the United Kingdom’s job retention scheme to reimburse us for a
portion of certain furloughed employees’ salaries from March 2020 through September 2021.
As a result of the actions taken above, we were able to strengthen our cash flow in fiscal 2021. As of
October 31, 2021, these actions resulted in a borrowing capacity of $875.0 million.
Insurance Reserves
We use a combination of insured and self-insurance programs to cover workers’ compensation, general
liability, automobile liability, property damage, and other insurable risks. Insurance claim liabilities represent our
estimate of retained risks without regard to insurance coverage. We retain a substantial portion of the risk related to
certain workers’ compensation and medical claims. Liabilities associated with these losses include estimates of both
filed claims and incurred but not reported claims (“IBNR Claims”).
With the assistance of third-party actuaries, we review our estimate of ultimate losses for IBNR Claims on a
quarterly basis and adjust our required self-insurance reserves as appropriate. As part of this evaluation, we review
the status of existing and new claim reserves as established by third-party claims administrators. The third-party
claims administrators establish the case reserves based upon known factors related to the type and severity of the
claims, demographic factors, legislative matters, and case law, as appropriate. We compare actual trends to
expected trends and monitor claims developments. The specific case reserves estimated by the third-party
administrators are provided to an actuary who assists us in projecting an actuarial estimate of the overall ultimate
losses for our self-insured or high deductible programs, which includes the case reserves plus an actuarial estimate
of reserves required for additional developments, such as IBNR Claims. We utilize the results of actuarial studies to
estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for
prior years.
The actuarial reviews demonstrate that the changes we have made to our risk management program
continue to positively impact the frequency and severity of claims. The claims management strategies and programs
that we have implemented have resulted in improvements. Furthermore, we continue to adjust our reserves
consistent with known fact patterns. Based on the results of the actuarial reviews performed, we decreased our total
reserves related to prior years for known claims as well as our estimate of the loss amounts associated with IBNR
claims during 2021 by $36.0 million. In 2020, we decreased our total reserves related to prior year claims by $30.2
million.
24
Key Financial Highlights
• Revenues increased by $241.0 million, or 4.0%, during 2021, as compared to 2020, primarily driven by a
$101.1 million revenue increase due to the Able Acquisition in the fourth quarter of 2021, an increase in
work orders (primarily as a result of the Pandemic), new business within B&I, T&M, and Technical Solutions,
and the recovery of volume in Education and Technical Solutions as Pandemic-related disruptions eased in
the last half of fiscal year 2021.
• Operating profit increased by $110.6 million during 2021, as compared to 2020. The increase in operating
profit was attributable to:
◦
◦
◦
◦
the absence of prior year impairment charges recorded on goodwill and intangible assets totaling
$172.8 million due to the adverse impact of market and business conditions resulting from the
Pandemic;
higher margins on work orders as a result of the Pandemic;
a decrease in bad debt expense, primarily associated with higher reserves established for client
receivables in the prior year, due to increasing credit risk resulting from the Pandemic; and
the absence of a reserve on notes receivable related to a unique, entertainment-related project
within Technical Solutions, mainly associated with increasing credit risk resulting from the
Pandemic.
The increase was partially offset by:
◦
◦
◦
◦
the accrual of a legal settlement for the Bucio case;
increased expenditures for certain technology projects and other enterprise initiatives (including
ELEVATE);
the absence of management and staff furloughs that occurred in the prior year in response to the
Pandemic; and
acquisition and integration costs related to the Able Acquisition.
• Our effective tax rate on income from continuing operations was 29.8% for 2021, as compared to 99.6%
during 2020, with the decrease primarily due to the impairment of non-deductible goodwill during 2020 and
not recurring in 2021.
• Net cash provided by operating activities of continuing operations was $314.3 million during 2021.
• Dividends of $51.0 million were paid to shareholders, and dividends totaling $0.760 per common share
were declared during 2021.
• At October 31, 2021, total outstanding borrowings under our credit facility were $888.8 million, and we had
up to $875.0 million of borrowing capacity.
25
Results of Operations
Consolidated
($ in millions)
Revenues
Operating expenses
Gross margin
Selling, general and administrative expenses
Restructuring and related expenses
Amortization of intangible assets
Impairment loss of goodwill and other intangibles
Operating profit
Income from unconsolidated affiliates
Interest expense
Income from continuing operations before
income taxes
Income tax provision
Income from continuing operations
Income (loss) from discontinued operations,
net of taxes
Net income
Other comprehensive income (loss)
Interest rate swaps
Foreign currency translation and other
Income tax (provision) benefit
Years Ended October 31,
2021 vs. 2020
2021
2020
2019
Increase / (Decrease)
$
6,228.6
$
5,987.6
$
6,498.6
$
241.0
5,258.2
5,157.0
5,767.5
101.2
4.0%
2.0%
13.9 %
11.2 %
171 bps
15.6 %
719.2
—
45.0
—
206.3
2.1
(28.6)
179.8
(53.5)
126.3
—
126.3
4.5
5.3
(1.5)
506.1
7.6
48.4
172.8
95.7
2.2
(44.6)
53.3
(53.1)
0.2
0.1
0.3
(7.6)
(1.8)
2.4
452.9
11.2
58.5
—
208.3
3.0
(51.1)
160.2
(32.7)
127.5
(0.1)
127.4
(22.4)
1.6
5.9
213.1
42.1%
(7.6)
(3.4)
NM*
(7.1)%
(172.8)
110.6
NM*
NM*
(0.1)
(3.9)%
(16.0)
35.9%
126.5
NM*
0.4
(0.8)%
126.1
NM*
(0.1)
126.0
12.1
7.1
(3.9)
NM*
NM*
NM*
NM*
NM*
NM*
Comprehensive income (loss)
$
134.5
$
(6.6)
$
112.5
$
141.1
*Not meaningful
The Year Ended October 31, 2021 Compared with the Year Ended October 31, 2020
Revenues
Revenues increased by $241.0 million, or 4.0%, during 2021, as compared to 2020. The increase in
revenues was primarily driven by a $101.1 million revenue increase due to the Able Acquisition in the fourth quarter
of 2021, an increase in work orders (primarily as a result of the Pandemic), new business within B&I, T&M, and
Technical Solutions, and the recovery of volume in Education and Technical Solutions as Pandemic-related
disruptions eased in the last half of fiscal year 2021.
Operating Expenses
Operating expenses increased by $101.2 million, or 2.0%, during 2021, as compared to 2020. Gross margin
increased by 171 bps to 15.6% in 2021 from 13.9% in 2020. The increase in gross margin was primarily associated
with higher margins on new business within B&I and Aviation and an increase in work orders with higher margins as
a result of the Pandemic (primarily within B&I). The increase in gross margin was also driven by lower self-
insurance expense, due to decreased claim frequency as a result of our safety and claims management program
and reduced workplace occupancy as a result of the Pandemic.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $213.1 million, or 42.1%, during 2021, as
compared to 2020. The increase in selling, general and administrative expenses was primarily attributable to:
•
a $144.2 million increase in legal costs and settlements, primarily attributed to the accrual of a legal
settlement for the Bucio case;
26
•
•
•
•
a $43.2 million increase in certain technology projects and other enterprise initiatives (including ELEVATE),
in addition to marketing events;
a $38.8 million increase in compensation and related expenses, primarily driven by corporate and staff labor
reductions that occurred in the prior period due to the Pandemic, including wage reductions, employee
furloughs, and the suspension of certain benefits such as 401(k) matching. The increase was also due to
updated assessments regarding financial performance target achievements in connection with certain
performance share awards and cash incentive plans;
a $21.9 million increase in acquisition and integration costs attributable to the Able Acquisition; and
a $9.1 million non-cash impairment charge for previously capitalized internal-use software related to our
ERP system implementation as we determined that certain components developed will no longer be
incorporated into the new ERP system;
This increase was partially offset by:
•
•
•
a $19.0 million decrease in bad debt expense, primarily associated with higher reserves established for
client receivables in the prior year, due to increasing credit risk resulting from the Pandemic;
the absence of a $17.6 million reserve on notes receivable related to a unique, entertainment-related
project within Technical Solutions, mainly associated with increasing credit risk resulting from the Pandemic;
and
an $11.7 million decrease in prior year medical and dental self-insurance reserves as a result of actuarial
evaluations completed in fiscal year 2021.
Restructuring and Related Expenses
Restructuring and related expenses decreased by $7.6 million during 2021, as compared to 2020. We
substantially completed the restructuring program by the end of fiscal year 2020.
Amortization of Intangible Assets
Amortization of intangible assets decreased by $3.4 million, or 7.1%, during 2021, as compared to 2020,
mainly due to the lower intangible assets balance resulting from the impairment loss recorded in the second quarter
of 2020 and to certain intangible assets being amortized using the sum-of-the-years’-digits method, which results in
declining amortization expense over the useful lives of the assets.
Impairment Loss
During 2020, we recorded impairment charges on goodwill related to our Education, Aviation, and U.K.
Technical Solutions businesses totaling $163.8 million. Additionally, we recorded impairment charges on customer
relationships related to our Aviation and U.K. Technical Solutions businesses totaling $9.0 million. During the second
quarter of 2020, these businesses were adversely impacted by the market and business conditions resulting from
the Pandemic. During 2021, we did not record any impairment charges to goodwill or intangible assets.
Interest Expense
Interest expense decreased by $16.0 million, or 35.9%, during 2021, as compared to 2020, primarily
attributable to lower relative interest rates as the result of amending our credit facility in 2021 and lower average
outstanding borrowings under our credit facility throughout the year.
Income Taxes from Continuing Operations
During 2021 and 2020, we had effective tax rates of 29.8% and 99.6%, respectively, resulting in a provision
for tax of $53.5 million and $53.1 million, respectively. Our effective tax rate for 2021 was also impacted by the
following discrete items: a $3.0 million provision for nondeductible transaction costs; a $2.6 million provision for
change in tax reserves; a $1.4 million provision for true-ups; and a $1.2 million benefit for energy efficiency
incentives. Our effective tax rate for 2020 was impacted by the following discrete items: a $5.7 million benefit from
true-ups; a $2.3 million provision related to the Work Opportunity Tax Credit (“WOTC”); a $2.1 million benefit from
27
energy efficiency incentives; and a $1.1 million benefit from change of tax reserves. The effective tax rate for the
year ended October 31, 2020, excluding a nondeductible impairment loss of $163.8 million, was 24.4%.
Interest Rate Swaps
We had a gain of $4.5 million on interest rate swaps during the year ended October 31, 2021, as compared
to a loss of $7.6 million during the year ended October 31, 2020, primarily due to underlying changes in the fair
value of our interest rate swaps.
Foreign Currency Translation and Other
We had a foreign currency translation gain of $5.3 million during the year ended October 31, 2021, as
compared to a foreign currency translation loss of $1.8 million during the year ended October 31, 2020. This change
was due to fluctuations in the exchange rate between the U.S. Dollar (“USD”) and the British pound sterling (“GBP”).
Future gains and losses on foreign currency translation will be dependent upon changes in the relative value of
foreign currencies to the USD and the extent of our foreign assets and liabilities.
The Year Ended October 31, 2020 Compared with the Year Ended October 31, 2019
For a comparison of our Results of Operations for the year ended October 31, 2020, to the year ended
October 31, 2019, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” of our Form 10-K for the fiscal year ended October 31, 2020, filed with the SEC on December 17, 2020.
28
Segment Information
Our current reportable segments consist of B&I, T&M, Education, Aviation, and Technical Solutions.
Financial Information for Each Reportable Segment
($ in millions)
Revenues
Business & Industry
Technology & Manufacturing
Education
Aviation
Technical Solutions
Years Ended October 31,
2021 vs. 2020
2021
2020
2019
Increase / (Decrease)
$ 3,346.5
$ 3,157.8
$ 3,251.4
$
188.7
987.1
836.4
668.8
534.0
956.0
808.8
680.9
506.6
917.0
847.4
1,017.3
593.2
(127.7)
31.1
27.6
6.0%
3.3%
3.4%
(12.1)
(1.8)%
27.4
5.4%
(21.8)
(17.8)%
Elimination of inter-segment revenues
(144.2)
(122.4)
Operating profit (loss)
Business & Industry
Operating profit margin
Technology & Manufacturing
Operating profit margin
Education
Operating margin
Aviation
Operating margin
Technical Solutions
Operating profit margin
Government Services
Operating profit margin
Corporate
Adjustment for income from unconsolidated
affiliates, included in Aviation
Adjustment for tax deductions for energy
efficient government buildings, included in
Technical Solutions
*Not meaningful
$ 6,228.6
$ 5,987.6
$ 6,498.6
$
241.0
4.0%
$
337.8
$
253.7
$
182.3
$
84.1
33.1%
10.1%
103.8
10.5%
60.5
7.2 %
32.5
4.9 %
49.8
9.3%
(0.2)
NM*
8.0%
84.4
8.8%
(41.1)
(5.1) %
(59.6)
(8.7) %
9.5
1.9%
(0.1)
NM*
5.6%
72.5
7.9%
39.0
4.6%
21.1
2.1%
55.4
9.3%
(0.1)
NM*
206 bps
19.4
22.9%
168 bps
101.6
NM*
92.1
NM*
40.3
745 bps
(0.1)
NM*
NM*
NM*
NM*
NM*
(374.6)
(146.9)
(159.0)
(227.7)
NM*
(2.1)
(2.2)
(3.0)
0.1
3.9%
(1.2)
(2.1)
0.1
0.9
$
206.3
$
95.7
$
208.3
$
110.6
44.2%
NM*
29
The Year Ended October 31, 2021 Compared with the Year Ended October 31, 2020
Business & Industry
($ in millions)
Revenues
Operating profit
Operating profit margin
Years Ended October 31,
2021
2020
$
3,346.5
337.8
$
3,157.8
253.7
$
10.1%
8.0%
Increase
188.7
84.1
206 bps
6.0%
33.1%
B&I revenues increased by $188.7 million, or 6.0%, during 2021, as compared to 2020. The increase was
primarily driven by a $101.1 million revenue increase due to the Able Acquisition in the fourth quarter of 2021. The
remaining increase was due to an increase in work orders (as a result of the Pandemic) and net new business in
our U.K. Operations. Management reimbursement revenues for this segment totaled $185.8 million and $221.4
million during 2021 and 2020, respectively.
Operating profit increased by $84.1 million, or 33.1%, during 2021, as compared to 2020. Operating profit
margin increased by 206 bps to 10.1% in 2021 from 8.0% in 2020. The increase in operating profit margin was
primarily associated with higher margins on certain accounts in both our U.S. and U.K. businesses and an increase
in work orders, which have higher margins. Operating margin was also positively impacted by lower insurance
expense related to our self-insurance program and a decrease in bad debt expense as higher reserves were
recorded in the prior year, mainly associated with increasing credit risk resulting from the Pandemic.
Technology & Manufacturing
($ in millions)
Revenues
Operating profit
Operating profit margin
Years Ended October 31,
2021
2020
$
$
987.1
103.8
10.5 %
$
956.0
84.4
8.8%
Increase
31.1
19.4
168 bps
3.3%
22.9%
T&M revenues increased by $31.1 million, or 3.3%, during 2021, as compared to 2020. The increase was
primarily attributable to net new business and an increase in work orders (primarily as a result of the Pandemic).
Operating profit increased by $19.4 million, or 22.9%, during 2021, as compared to 2020. Operating profit
margin increased by 168 bps to 10.5% in 2021 from 8.8% in 2020. The increase in operating profit margin was
primarily attributable to a decrease in bad debt expense, as higher reserves were recorded in the prior year mainly
associated with increasing credit risk resulting from the Pandemic, and higher margins on work orders.
Education
($ in millions)
Revenues
Operating profit (loss)
Operating margin
*Not meaningful
Years Ended October 31,
2021
2020
$
$
836.4
60.5
7.2%
$
808.8
(41.1)
(5.1) %
Increase
27.6
101.6
NM*
3.4%
NM*
Education revenues increased by $27.6 million, or 3.4%, during 2021, as compared to 2020. The increase
was primarily attributable to an increase in work orders as a result of Pandemic-related demands and recovery in
the volume of our business as schools gradually reopened. The increase was partially offset by the loss of certain
accounts during the year.
Education had an operating profit of $60.5 million during 2021, as compared to an operating loss of $41.1
million during 2020. Operating margin increased to 7.2% in 2021 from (5.1)% in 2020. The increase in operating
profit margin was primarily attributable to the absence of prior year goodwill impairment charges of $99.3 million.
Additionally, operating margin was positively impacted by higher margin work orders, a decrease in bad debt
expense, driven by net recoveries of certain previously reserved receivables, and lower amortization of intangible
assets. The increase in operating margin, excluding the impact of prior year impairment, was mostly offset by the
increase in direct labor and related costs as schools reopened.
30
Aviation
($ in millions)
Revenues
Operating profit (loss)
Operating margin
*Not meaningful
Years Ended October 31,
2021
2020
Increase / (Decrease)
$
$
668.8
32.5
4.9%
$
680.9
(59.6)
(8.7) %
(12.1)
92.1
NM*
(1.8)%
NM*
Aviation revenues decreased by $12.1 million, or 1.8%, during 2021, as compared to 2020. The decrease
was primarily attributable to travel restrictions and a decline in passenger demand resulting from the Pandemic.
While demand and revenue improved during the third and fourth quarter of 2021, Pandemic-related volume
reductions continued to impact parking, janitorial, passenger services, transportation, and catering accounts. The
decrease was partially offset by Pandemic-related cleaning services and new parking-related services.
Management reimbursement revenues for this segment totaled $54.5 million and $74.3 million during 2021 and
2020, respectively.
Aviation had an operating profit of $32.5 million during 2021, as compared to an operating loss of $59.6
million during 2020. Operating margin increased to 4.9% during 2021, from (8.7)% during 2020. This increase in
operating profit margin was primarily attributable to the absence of prior year impairment charges of $55.5 million on
goodwill and $5.6 million on customer relationships. Additionally, operating margin increased as the result of
management of direct labor and related personnel costs during the Pandemic, higher margins on Pandemic-related
cleaning services, and a strategic shift toward securing higher margin contracts with airports and related facilities.
Technical Solutions
($ in millions)
Revenues
Operating profit
Operating profit margin
*Not meaningful
Years Ended October 31,
2021
2020
$
$
534.0
49.8
9.3%
$
506.6
9.5
1.9%
Increase
27.4
40.3
745 bps
5.4%
NM*
Technical Solutions revenues increased by $27.4 million, or 5.4%, during 2021, as compared to 2020. The
increase was primarily attributable to an increase in the volume of our U.S. and U.K. businesses due to the easing
of Pandemic-related lockdowns, which provided access to facilities that were previously restricted. In addition, the
revenue increase was driven by growth in electric vehicle charging station installation sales.
Operating profit increased by $40.3 million during 2021, as compared to 2020. Operating profit margin
increased by 745 bps to 9.3% in 2021 from 1.9% in 2020. The increase in operating profit margin was primarily
attributable to the absence of a prior year $17.6 million reserve on notes receivable related to a unique,
entertainment-related project, mainly associated with increasing credit risk resulting from the Pandemic. The
increase was also due to the absence of prior year impairment charges of $9.0 million on goodwill and $3.4 million
on customer relationships related to our U.K. business.
Corporate
($ in millions)
Corporate expenses
*Not meaningful
Years Ended October 31,
2021
2020
Increase
$
(374.6) $
(146.9) $
(227.7)
NM*
Corporate expenses increased by $227.7 million during 2021, as compared to 2020. The increase in
corporate expenses was primarily related to:
31
•
•
•
•
•
a $145.8 million increase in legal costs and settlements, primarily attributed to the accrual of a legal
settlement for the Bucio case;
a $43.2 million increase in certain technology projects and other enterprise initiatives (including ELEVATE),
in addition to marketing events;
a $33.4 million increase in compensation and related expenses, primarily driven by corporate and staff labor
reductions that occurred in the prior period due to the Pandemic, including wage reductions, employee
furloughs, and the suspension of certain benefits such as 401(k) matching. The increase was also due to
updated assessments regarding financial performance target achievements in connection with certain
performance share awards and cash incentive plans;
a $21.9 million increase in acquisition and integration costs attributable to the Able Acquisition; and
a $9.1 million non-cash impairment charge for previously capitalized internal-use software related to our
ERP system implementation as we determined that certain components developed will no longer be
incorporated into the new ERP system.
This increase was partially offset by:
•
•
a $17.4 million decrease in insurance expense as the result of favorable self-insurance reserve adjustments
from actuarial evaluations completed in fiscal year 2021 as compared to 2020; and
a $7.6 million decrease in restructuring and related expenses due to the completion of our restructuring
program in fiscal year 2020.
The Year Ended October 31, 2020 Compared with the Year Ended October 31, 2019
For a comparison of our Segment Information for the year ended October 31, 2020, to the year ended
October 31, 2019, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” of our Form 10-K for the fiscal year ended October 31, 2020, filed with the SEC on December 17, 2020.
32
Liquidity and Capital Resources
Our primary sources of liquidity are operating cash flows and borrowing capacity under our credit facility.
We assess our liquidity in terms of our ability to generate cash to fund our short- and long-term cash requirements.
As such, we project our anticipated cash requirements as well as cash flows generated from operating activities to
meet those needs.
In addition to normal working capital requirements, we anticipate that our short- and long-term cash
requirements will include funding legal settlements, insurance claims, dividend payments, capital expenditures,
share repurchases, mandatory loan repayments, and systems and technology transformation initiatives under our
ELEVATE strategy. We anticipate long-term cash uses may also include strategic acquisitions. On a long-term
basis, we will continue to rely on our credit facility for any long-term funding not provided by operating cash flows.
We believe that the Pandemic has had, and will likely continue to have, an impact on our consolidated
financial position, results of operations, and cash flows. Since we cannot predict the duration or scope of the
Pandemic, we cannot fully anticipate or reasonably estimate all the ways in which the current global health crisis
and financial market conditions could adversely impact our business in fiscal 2022 or in the future.
We have taken and continue to take certain steps to preserve liquidity, including: imposing furloughs or
reduced hours for certain service employees in markets significantly impacted by business slowdowns and
shutdowns; managing our operating expenditures and certain selling, general and administrative expenses;
amending our credit facility, as further described under “Credit Facility” below; and suspending share repurchases
under our share repurchase program. In addition, we continue focusing on collection of customer receivables,
monitoring the adequacy of our reserves, and extending vendor payment terms where possible. We also evaluated
the business tax provisions of the CARES Act and have deferred remittance of approximately $132 million of payroll
tax through December 31, 2020, which the CARES Act requires to be remitted by December 31, 2021, and
December 31, 2022, in equal parts.
We believe that our operating cash flows and borrowing capacity under our credit facility are sufficient to
fund our cash requirements for the next 12 months. In the event that our plans change or our cash requirements are
greater than we anticipate, we may need to access the capital markets to finance future cash requirements.
However, there can be no assurance that such financing will be available to us should we need it or, if available, that
the terms will be satisfactory to us and not dilutive to existing shareholders.
Credit Facility
On September 1, 2017, we refinanced and replaced our then-existing $800.0 million credit facility with a
new senior, secured five-year syndicated credit facility (the “Credit Facility”), consisting of a $900.0 million revolving
line of credit and an $800.0 million amortizing term loan. In accordance with the terms of the Credit Facility, the
revolving line of credit was reduced to $800.0 million on September 1, 2018.
On May 28, 2020, we amended and restated our Credit Facility (“the First Amendment”) to further enhance
our financial flexibility as a precautionary measure in response to uncertainty arising from the Pandemic. The First
Amendment modified certain financial covenants, the interest rate, interest margins, and commitment fees
applicable to loans and commitments under the Credit Facility. The First Amendment made certain additional
changes to the negative covenants restrictions under the Credit Facility, including, subject to certain exceptions:
restrictions on our ability to make acquisitions, share repurchases, and other defined restricted payments,
depending on our total net leverage ratio.
On June 28, 2021, the Company amended and restated the Credit Facility (the “Second Amendment,” and
the Credit Facility as amended, the “Amended Credit Facility”), extending the maturity date to June 28, 2026, and
increasing the capacity of the revolving credit facility from $800.0 million to $1.3 billion and the then-remaining term
loan outstanding from $620.0 million to $650.0 million. The Second Amendment also removed the anti-cash
hoarding mandatory prepayment requirement as well as other restrictions that limited our ability to make
acquisitions, share repurchases, and other defined restricted payments under the First Amendment. Additionally, the
Second Amendment modified certain financial covenants, terms, interest rates, interest margins, and commitment
fees applicable to loans and commitments under the prior Credit Facility. The Amended Credit Facility provides for
the issuance of up to $350.0 million for standby letters of credit and the issuance of up to $75.0 million in swingline
advances. The obligations under the Amended Credit Facility are secured on a first-priority basis by a lien on
33
substantially all of our assets and properties, subject to certain exceptions. We may repay amounts borrowed under
the Amended Credit Facility at any time without penalty.
Under the Amended Credit Facility, the term loan and U.S.-dollar-denominated borrowings under the
revolver bear interest at a rate equal to one-month LIBOR plus a spread based upon our leverage ratio. Euro- and
sterling-denominated borrowings under the revolver bear at the interest rate of the Euro Interbank Offered Rate
(EURIBOR) and the daily Sterling Overnight Index Average (SONIA) reference rate, respectively, plus a spread that
is based upon our leverage ratio. The spread ranges from 1.375% to 2.250% for Eurocurrency loans and 0.375% to
1.250% for base rate loans. At October 31, 2021, the weighted average interest rate on our outstanding borrowings
was 1.59%. We also pay a commitment fee, based on our leverage ratio and payable quarterly in arrears, ranging
from 0.20% to 0.40% on the average daily unused portion of the line of credit. For purposes of this calculation,
irrevocable standby letters of credit, which are issued primarily in conjunction with our insurance programs, and
cash borrowings are included as outstanding under the line of credit.
The Amended Credit Facility contains certain covenants, including a maximum total net leverage ratio of
5.00 to 1.00, a maximum secured net leverage ratio of 4.00 to 1.00, and a minimum interest coverage ratio of 1.50
to 1.00, as well as other financial and non-financial covenants. In the event of a material acquisition, as defined in
the Amended Credit Facility, we may elect to increase the maximum total net leverage ratio to 5.50 to 1.00 for a total
of four fiscal quarters and increase the maximum secured net leverage ratio to 4.50 to 1.00 for a total of four fiscal
quarters. We did not make this election for the Able Acquisition. Our borrowing capacity is subject to, and limited by,
compliance with the covenants described above. At October 31, 2021, we were in compliance with these covenants
and expect to be in compliance in the foreseeable future.
During 2021, we made $76.3 million of principal payments under the term loan. At October 31, 2021, the
total outstanding borrowings under our Amended Credit Facility in the form of cash borrowings and standby letters
of credit were $888.8 million and $167.7 million, respectively. At October 31, 2021, we had up to $875.0 million of
borrowing capacity.
On March 5, 2021, the United Kingdom’s Financial Conduct Authority, the regulator of LIBOR, announced
that the USD LIBOR rates will no longer be published after June 30, 2023. While we expect LIBOR to be available
in substantially its current form until at least the end of June 30, 2023, it is possible that LIBOR will become
unavailable prior to that point, which may impact our Amended Credit Facility and interest rate swaps. Our current
credit agreement as well as our International Swaps and Derivatives Association, Inc. agreement provide for any
changes away from LIBOR to a successor rate to be based on prevailing or equivalent standards. Additionally, our
interest rate swaps mature before June 30, 2023. As such, we do not anticipate a material impact related to the
LIBOR transition and will continue to monitor developments related to the LIBOR transition and/or identification of
an alternative, market-accepted rate.
Reinvestment of Foreign Earnings
We plan to reinvest our foreign earnings to fund future non-U.S. growth and expansion, and we do not
anticipate remitting such earnings to the United States. While U.S. federal tax expense has been recognized as a
result of the Tax Cuts and Jobs Act of 2017, no deferred tax liabilities with respect to federal and state income taxes
or foreign withholding taxes have been recognized. We believe that our cash on hand in the United States, along
with our Amended Credit Facility and future domestic cash flows, are sufficient to satisfy our domestic liquidity
requirements.
Share Repurchases
Effective December 18, 2019, our Board of Directors replaced our then-existing share repurchase program
with a new share repurchase program under which we may repurchase up to $150.0 million of our common stock.
We repurchased shares under the 2019 Share Repurchase Program during the second quarter of 2020. However,
due to the market and business conditions arising from the Pandemic, we suspended further repurchases of our
common stock in March 2020 and did not repurchase any shares of our outstanding common stock during fiscal
year 2021. At October 31, 2021, authorization for $144.9 million of repurchases remained under the 2019 Share
Repurchase Program.
34
(in millions, except per share amounts)
Total number of shares purchased
Average price paid per share
Total cash paid for share repurchases
Years Ended October 31,
2020
2021
—
N/A $
— $
0.2
36.16
5.1
$
Proceeds from Federal Energy Savings Performance Contracts
As part of our Technical Solutions business, we enter into energy savings performance contracts (“ESPC”)
with the federal government pursuant to which we agree to develop, design, engineer, and construct a project and
guarantee that the project will satisfy agreed-upon performance standards. Proceeds from ESPC projects are
generally received in advance of construction through agreements to sell the ESPC receivables to unaffiliated third
parties. We use the advances from the third parties under these agreements to finance the projects, which are
recorded as cash flows from financing activities. The use of the cash received under these arrangements to pay
project costs is classified as operating cash flows.
Effect of Inflation
The rates of inflation experienced in recent years have not had a material impact on our Financial
Statements. We attempt to recover increased costs by increasing prices for our services to the extent permitted by
contracts and competition.
Regulatory Environment
Our operations are subject to various federal, state, and/or local laws, rules, and regulations regulating the
discharge of materials into the environment or otherwise relating to the protection of the environment, as well as
laws and regulations relating to, among other things, labor, wages, and health and safety matters. Historically, the
cost of complying with these laws, rules, and regulations has not had a material adverse effect on our financial
position, results of operations, or cash flows.
Cash Flows
In addition to revenues and operating profit, our management views operating cash flows as a good
indicator of financial performance, because strong operating cash flows provide opportunities for growth both
organically and through acquisitions. Operating cash flows primarily depend on: revenue levels; the quality and
timing of collections of accounts receivable; the timing of payments to suppliers and other vendors; the timing and
amount of income tax payments; and the timing and amount of payments on insurance claims and legal
settlements.
(in millions)
Net cash provided by operating activities of continuing operations
Net cash provided by (used in) operating activities of discontinued operations
Net cash provided by operating activities
$
Years Ended October 31,
2020
2019
2021
314.3 $
—
314.3
457.4 $
0.1
457.5
262.8
(0.1)
262.7
Net cash used in investing activities
(740.0)
(27.5)
(58.3)
Net cash provided by (used in) financing activities
92.4
(94.1)
(184.8)
Operating Activities of Continuing Operations
Net cash provided by operating activities of continuing operations decreased by $143.1 million during 2021,
as compared to 2020. The decrease was primarily related to the timing of working capital changes, partially offset by
deferred remittance of payroll taxes under the CARES Act.
Net cash provided by operating activities of continuing operations increased by $194.6 million during 2020,
as compared to 2019. The increase was primarily related to the timing of client receivable collections and deferred
remittance of approximately $101 million of payroll taxes under the CARES Act, partially offset by the timing of
vendor payments.
35
Investing Activities
Net cash used in investing activities increased by $712.5 million during 2021, as compared to 2020. The
increase was primarily related to the Able Acquisition during the fourth quarter of 2021.
Net cash used in investing activities decreased by $30.8 million during 2020, as compared to 2019. The
decrease was primarily related to lower additions to property, plant and equipment in 2020. Additionally, the
implementation of the new ERP system was temporarily suspended during 2020 due to the Pandemic.
Financing Activities
Net cash provided by financing activities was $92.4 million in 2021, as compared to net cash used in
financing activities of $94.1 million in 2020, primarily due to higher net borrowings to partially fund the purchase
price of the Able Acquisition.
Net cash used in financing activities decreased by $90.7 million during 2020, as compared to 2019,
primarily due to lower repayments of our borrowings in 2020.
Dividends
On December 15, 2021, we announced a quarterly cash dividend of $0.195 per share on our common
stock, payable on February 7, 2022. We declared a quarterly cash dividend on our common stock every quarter
during 2021, 2020, and 2019. We paid total annual dividends of $51.0 million, $49.3 million, and $47.7 million during
2021, 2020, and 2019, respectively.
36
Material Cash Requirements from Contractual and Other Obligations
As of October 31, 2021, our material cash requirements for our known contractual and other obligations
were as follows:
•
Debt Obligations and Interest Payments – Outstanding payments on our Amended Credit Facility were
$888.8 million, with $32.5 million payable within 12 months. Additionally, we had future interest payments
based on our hedged borrowings under our Amended Credit Facility of $5.0 million, which is payable
within 12 months. The interest payments on our remaining borrowings under the Amended Credit Facility
will be determined based upon the average outstanding balance of our borrowings and the prevailing
interest rate during that time. See Note 11, “Credit Facility,” in the Financial Statements for further detail
of our debt and the timing of expected future principal and interest payments.
• Operating and Finance Leases – We enter into various noncancelable lease agreements for office
space, parking facilities, warehouses, vehicles, and equipment used in the normal course of business.
Operating and finance lease obligations were $170.6 million, with $38.9 million payable within 12
months. See Note 5, “Leases,” in the Financial Statements for further detail of our obligations and the
timing of expected future payments.
•
•
•
•
•
Service Concession Arrangements – As defined under Topic 853, Service Concession Arrangements,
our leased location parking arrangements are represented as service concession arrangements. We had
contractual payments for these arrangements of $89.9 million, with $24.9 million payable within 12
months.
Information Technology Service Agreements – Information technology service agreements represent
outsourced services and licensing costs pursuant to our information technology agreements. We had
contractual payments for these agreements of $79.9 million, with $44.9 million payable within 12 months.
Benefit Obligations – Expected future payments relating to our defined benefit, postretirement, and
deferred compensation plans were $45.8 million, with $4.5 million payable in 12 months. These amounts
are based on expected future service and were calculated using the same assumptions used to measure
our benefit obligation at October 31, 2021.
Litigation Settlements – A litigation settlement of $142.9 million related to the Bucio case is payable in 12
months. See Note 13, “Commitments and Contingencies,” in the Financial Statements for further details.
CARES Act Tax Obligations – We deferred approximately $132 million of payroll tax provisions under the
CARES Act with $66 million payable in 12 months. See Note 16, “Income Taxes,” in the Financial
Statements for further details.
In addition, our material cash requirements for other obligations, for which we cannot reasonably
estimate future payments, include the following:
• Multiemployer Benefit Plans – In addition to our company sponsored benefit plans, we participate in
certain multiemployer pension and other postretirement plans. The cost of these plans is equal to the
annual required contributions determined in accordance with the provisions of negotiated collective
bargaining arrangements. During 2021, 2020, and 2019, contributions made to these plans were
$348.8 million, $335.8 million, and $345.4 million, respectively; however, our future contributions to the
multiemployer plans are dependent upon a number of factors, including the funded status of the plans,
the ability of other participating companies to meet ongoing funding obligations, and the level of our
ongoing participation in these plans. Amounts of future contributions that we would be contractually
obligated to make pursuant to these plans cannot be reasonably estimated. See Note 12, “Employee
Benefit Plans,” in the Financial Statements for more information.
•
Self-Insurance Obligations – We may make payments for exposures for which we are self-insured,
including workers’ compensation, general liability, automobile liability, property damage, and other
insurable risks. At October 31, 2021, our self-insurance reserves, net of recoverables, were $508.3
million. As these obligations do not have scheduled maturities, we are unable to make a reliable estimate
of the amount or timing of cash that may be required to settle these matters. See Note 10, “Insurance,” in
the Financial Statements for further detail.
37
•
Unrecognized Tax Benefits – At October 31, 2021, our total liability for unrecognized tax benefits was
$12.5 million. The resolution or settlement of these tax positions with the taxing authorities is subject to
significant uncertainty, and therefore we are unable to make a reliable estimate of the amount or timing
of cash that may be required to settle these matters. In addition, certain of these matters may not require
cash settlements due to the exercise of credits and net operating loss carryforwards as well as other
offsets, including the indirect benefit from other taxing jurisdictions that may be available.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements other than unrecorded standby letters of credit and surety
bonds. We use letters of credit and surety bonds in the ordinary course of business to ensure the performance of
contractual obligations and to collateralize self-insurance obligations in the event we are unable to meet our
claim payment obligations. As we already have reserves on our books for the claims costs, these do not
represent additional liabilities. The surety bonds typically remain in force for one to five years and may include
optional renewal periods. As of October 31, 2021, these letters of credit and surety bonds totaled $167.7 million
and $687.3 million, respectively. Neither of these arrangements has a material current effect, or is reasonably
likely to have a material future effect, on our financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures, or capital resources.
38
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in accordance with United States generally accepted
accounting principles requires our management to make certain estimates that affect the reported amounts. We
base our estimates on historical experience, known or expected trends, independent valuations, and various other
assumptions that we believe to be reasonable under the circumstances. As future events and their effects cannot be
determined with precision, actual results could differ significantly from these estimates. There have been no
significant changes to our critical accounting policies and estimates for the year ended October 31, 2021. We
believe the following critical accounting policies govern the more significant judgments and estimates used in the
preparation of our Financial Statements.
Description
Judgments and Uncertainties
Effect if Actual Results Differ from Assumptions
We have not made any changes in the accounting
methodology used to determine the fair value of customer
relationships during the last three years.
If the subsequent actual results and updated projections of
the underlying business activity change compared with the
assumptions and projections used to develop the values of
the identifiable intangible assets, then we could record
material impairment losses.
With other assumptions held constant, a 10% increase in
the calculated fair value of the Able customer relationships
would increase the annual amortization expense by $2.8
million in 2022.
See the “Valuation of Long-Lived Assets” critical accounting
policy for information about impairment evaluations.
Future revenue growth, future
operating performance margin as a
percentage of revenues, customer
attrition rate, and discount rate
applied are the significant
estimates used in the excess
earnings method to determine the
fair value of customer
relationships. These estimates are
influenced by many factors,
including historical financial
information, estimated retention
rates, and management's
expectations for future customer
growth as a combined company.
Another estimate that impacts the
valuation is the contributory charge
for the acquired workforce, which
involves management assumptions
based on historical experience,
including interview time and new
hire productivity.
The estimated life is determined by
calculating the number of years
necessary to obtain 90% of the
value of the discounted cash flows
of the relationships and is directly
tied to the accuracy of the above
assumptions.
Customer Relationships
When we acquire a
company, we determine
the fair value on the
acquisition date of assets
acquired and liabilities
assumed.
We anticipate that for most
acquisitions, we will
exercise significant
judgment in estimating the
fair value of intangible
assets.
In a typical acquisition,
customer relationships are
our most significant
definite-lived intangible
asset. In valuing these
relationships, we engage a
third-party valuation expert
to fair value these assets
using a version of the
income approach known as
the “excess earnings
method.”
This method uses a
discounted cash flow
approach that is derived
from historical information,
future revenue and
operating profit margins,
contributory asset charges,
and the selection of an
appropriate discount rate.
We consider this approach
the most appropriate
valuation technique
because the inherent value
of these assets is their
ability to generate current
and future income.
39
Description
Judgments and Uncertainties
Effect if Actual Results Differ from Assumptions
During the last three years, we have not made any changes
in the accounting methodology used to evaluate the
impairment of long-lived assets or to estimate the useful
lives of our long-lived assets. Additionally, we have not
made any changes in the accounting methodology used to
evaluate impairment of goodwill during the last three years.
At October 31, 2021, we had $2.2 billion of goodwill. Our
goodwill is included in the following segments:
$1.1 billion — B&I (includes $554.0 million related to the
Able Acquisition on September 30, 2021)
$407.2 million — T&M
$459.3 million — Education
$69.9 million — Aviation
$162.7 million — Technical Solutions
A goodwill impairment analysis was performed for each of
our reporting units on August 1, 2021. Based on these
studies, the implied fair value of each of our reporting units
was substantially in excess of its carrying value. Therefore,
we concluded there were no indicators of impairment. A
10% decrease in the estimated fair value of any of our
reporting units would not have resulted in a different
conclusion.
During the third quarter of 2021, we recognized a non-cash
impairment charge totaling $9.1 million in our Corporate
segment for previously capitalized internal-use software
related to our ERP system implementation. The Company
determined that certain components that were previously
developed would no longer be integrated into the new ERP
system. The impairment charge reduced the carrying value
to zero for those components.
During the second quarter of 2020, given the general
deterioration in economic and market conditions arising
from the Pandemic, we identified a triggering event
indicating possible impairment of goodwill and intangible
assets. For the three goodwill reporting units tested
quantitatively, we estimated the fair value using a weighting
of fair values derived from an income approach and a
market approach. Based on the evaluation performed, we
determined that goodwill was impaired for each of the three
goodwill reporting units evaluated and recognized a non-
cash impairment charge totaling $163.8 million ($99.3
million related to Education, $55.5 million related to
Aviation, and $9.0 million related to our U.K. Technical
Solutions business). We also recognized intangible asset
impairment charges of $5.6 million related to Aviation and
$3.4 million related to our U.K. Technical Solutions
business. We performed our annual goodwill impairment
analysis on August 1, 2020, using a qualitative approach
since there were no indicators of impairment subsequent to
our quantitative analysis performed in the second quarter of
2020 as discussed above. As a result of the qualitative
analysis, we concluded that there were no further
impairments.
Valuation of Long-Lived
Assets
We evaluate our fixed
assets and amortizable
intangible assets for
impairment whenever
events or changes in
circumstances indicate that
the carrying amount of
such assets may not be
recoverable. These events
and circumstances include,
but are not limited to:
higher than expected
attrition for customer
relationships; a current
expectation that a long-
lived asset will be disposed
of significantly before the
end of its previously
estimated useful life, such
as when we classify a
business as held for sale; a
significant adverse change
in the extent or manner in
which we use a long-lived
asset; or a change in the
physical condition of a
long-lived asset.
Undiscounted cash flow
analyses are used to
determine if impairment
exists; if impairment is
determined to exist, the
loss is calculated based on
estimated fair value.
Goodwill is not amortized
but rather tested at least
annually for impairment or
more often if events or
changes in circumstances
indicate it is more-likely-
than-not that the carrying
amount of the asset may
not be recoverable.
Goodwill is tested for
impairment at the reporting
unit level, which represents
an operating segment or a
component of an operating
segment. Goodwill is
tested for impairment by
either performing a
qualitative evaluation or a
quantitative test. The
qualitative evaluation is an
assessment of factors to
determine whether it is
more-likely-than-not that
the fair value of a reporting
unit is less than its carrying
amount, including goodwill.
We may elect not to
perform the qualitative
assessment for some or all
of our reporting units and
instead perform a
quantitative impairment
test.
Our impairment evaluations require
us to apply judgment in
determining whether a triggering
event has occurred, including the
evaluation of whether it is more-
likely-than-not that a long-lived
asset will be disposed of
significantly before the end of its
previously estimated useful life.
Incorrect estimation of useful lives
may result in inaccurate
depreciation and amortization
charges over future periods
leading, to future impairment.
Our impairment loss calculations
contain uncertainties because they
require management to make
assumptions and to apply
judgment to estimate future cash
flows and asset fair values,
including forecasting useful lives of
the assets and selecting the
discount rate that reflects the risk
inherent in future cash flows.
We estimate the fair value of each
reporting unit using a combination
of the income approach and the
market approach.
The income approach incorporates
the use of a discounted cash flow
method in which the estimated
future cash flows and terminal
value are calculated for each
reporting unit and then discounted
to present value using an
appropriate discount rate.
The valuation of our reporting units
requires significant judgment in
evaluation of recent indicators of
market activity and estimated
future cash flows, discount rates,
and other factors. Our impairment
analyses contain inherent
uncertainties due to uncontrollable
events that could positively or
negatively impact anticipated future
economic and operating
conditions.
In making these estimates, the
weighted-average cost of capital is
utilized to calculate the present
value of future cash flows and
terminal value. Many variables go
into estimating future cash flows,
including estimates of our future
revenue growth and operating
results. When estimating our
projected revenue growth and
future operating results, we
consider industry trends, economic
data, and our competitive
advantage.
The market approach estimates
fair value of a reporting unit by
using market comparables for
reasonably similar public
companies.
40
Judgments and Uncertainties
Effect if Actual Results Differ from Assumptions
We have not made any changes in the accounting
methodology used to establish our self-insurance
liabilities during the past three years.
After analyzing recent loss development patterns,
comparing the loss development patterns against
benchmarks, and applying actuarial projection
methods to estimate the ultimate losses, we
decreased our total reserves related to prior years
known claims as well as our estimate of the loss
amounts associated with IBNR claims during 2021
by $36.0 million. In 2020, we decreased our total
reserves related to prior years claims by $30.2
million.
It is possible that actual results could differ from
recorded self-insurance liabilities. A 10% change in
our projected ultimate losses would have affected
net income by approximately $37.3 million for 2021.
Our self-insurance liabilities
contain uncertainties due to
assumptions required and
judgment used.
Costs to settle our obligations,
including legal and healthcare
costs, could fluctuate and cause
estimates of our self-insurance
liabilities to change.
Incident rates, including frequency
and severity, could fluctuate and
cause the estimates in our self-
insurance liabilities to change.
These estimates are subject to:
changes in the regulatory
environment; fluctuations in
projected exposures, including
payroll, revenues, and the number
of vehicle units; and the frequency,
lag, and severity of claims.
The full extent of certain claims,
especially workers’ compensation
and general liability claims, may
not be fully determined for several
years.
In addition, if the reserves related
to self-insurance or high deductible
programs from acquired
businesses are not adequate to
cover damages resulting from
future accidents or other incidents,
we may be exposed to substantial
losses arising from future claim
developments.
Description
Insurance Reserves
We use a combination of insured
and self-insurance programs to
cover workers’ compensation,
general liability, automobile liability,
property damage, and other
insurable risks.
Insurance claim liabilities
represent our estimate of retained
risks without regard to insurance
coverage. We retain a substantial
portion of the risk related to certain
workers’ compensation and
medical claims. Liabilities
associated with these losses
include estimates of both claims
filed and IBNR Claims.
With the assistance of third-party
actuaries, we periodically review
our estimate of ultimate losses for
IBNR Claims and adjust our
required self-insurance reserves
as appropriate. As part of this
evaluation, we review the status of
existing and new claim reserves as
established by our third-party
claims administrators.
The third-party claims
administrators establish the case
reserves based upon known
factors related to the type and
severity of the claims,
demographic data, legislative
matters, and case law, as
appropriate.
We compare actual trends to
expected trends and monitor
claims development.
The specific case reserves
estimated by the third-party
administrators are provided to an
actuary who assists us in
projecting an actuarial estimate of
the overall ultimate losses for our
self-insured or high deductible
programs. The projection includes
the case reserves plus an actuarial
estimate of reserves required for
additional developments, including
IBNR Claims.
We utilize the results of actuarial
studies to estimate our insurance
rates and insurance reserves for
future periods and to adjust
reserves, if appropriate, for prior
years.
41
Description
Judgments and Uncertainties
Effect if Actual Results Differ from Assumptions
Contingencies and Litigation
We are a party to a number of
lawsuits, claims, and proceedings
incident to the operation of our
business, including those
pertaining to labor and
employment, contracts, personal
injury, and other matters, some of
which allege substantial monetary
damages. Some of these actions
may be brought as class actions
on behalf of a class or purported
class of employees.
We accrue for loss contingencies
when losses become probable and
are reasonably estimable. If the
reasonable estimate of the loss is
a range and no amount within the
range is a better estimate, the
minimum amount of the range is
recorded as a liability.
We do not accrue for contingent
losses that, in our judgment, are
considered to be reasonably
possible but not probable.
Litigation outcomes are difficult to
predict and are often resolved over
long periods of time.
We have not made any changes in the accounting
methodology used to establish our loss
contingencies during the past three years.
Our management currently estimates the range of
loss for all reasonably possible losses for which a
reasonable estimate of the loss can be made is
between zero and $6 million. Factors underlying this
estimated range of loss may change from time to
time, and actual results may vary significantly from
this estimate.
Estimating probable and
reasonably possible losses
requires the analysis of multiple
possible outcomes that often
depend on judgments about
potential actions by third parties,
such as future changes in facts
and circumstances, differing
interpretations of the law,
assessments of the amount of
damages, and other factors
beyond our control. There is the
potential for a material adverse
effect on our Financial Statements
if one or more matters are
resolved in a particular period in
an amount materially in excess of
what we anticipated.
In addition, in some cases,
although a loss is probable or
reasonably possible, we cannot
reasonably estimate the maximum
potential losses for probable
matters or the range of losses for
reasonably possible
matters. Therefore, our accrual for
probable losses and our estimated
range of loss for reasonably
possible losses do not represent
our maximum possible exposure.
42
Recent Accounting Pronouncements
Accounting
Standard
Updates
2021-01
Topic
Reference Rate
Reform (Topic 848):
Scope
Summary
This Accounting Standard Update (“ASU”), issued in January
2021, clarifies that derivatives affected by the discounting
transition are explicitly eligible for certain optional expedients
and exceptions under Topic 848.
While we are currently evaluating the impact of
implementing this guidance on our financial statements, we
do not expect adoption to have a material impact.
2020-04
Reference Rate
Reform (Topic 848):
Facilitation of the
Effects of Reference
Rate Reform on
Financial Reporting
This ASU, issued in March 2020, provides optional
expedients to assist with the discontinuance of LIBOR. The
expedients allow companies to ease the potential accounting
burden when modifying contracts and hedging relationships
that use LIBOR as a reference rate, if certain criteria are
met.
2020-01
Investments—Equity
Securities (Topic 321),
Investments—Equity
Method and Joint
Ventures (Topic 323),
and Derivatives and
Hedging (Topic 815):
Clarifying the
Interactions between
Topic 321, Topic 323,
and Topic 815
While we are currently evaluating the impact of
implementing this guidance on our financial statements, we
do not expect adoption to have a material impact.
This ASU, issued in January 2020, clarifies the interaction
between Topic 321, Topic 323, and Topic 815. The new
guidance, among other things, states that a company should
consider observable transactions that require it to either
apply or discontinue the equity method of accounting for the
purposes of applying the fair value measurement alternative
immediately before applying or upon discontinuing the equity
method.
While we are currently evaluating the impact of
implementing this guidance on our financial statements, we
do not expect adoption to have a material impact.
Effective Date/
Method of Adoption
This update was effective
upon issuance and can
be applied to hedging
relationships
retrospectively or
prospectively through
December 31, 2022.
This update was effective
upon issuance and can
be applied prospectively
to contract modifications
made and hedging
relationships entered into
or evaluated through
December 31, 2022.
November 1, 2021
This update will be
applied prospectively.
2019-12
Income Taxes (Topic
740): Simplifying the
Accounting for Income
Taxes
This ASU, issued in December 2019, removes certain
exceptions related to the approach for intraperiod tax
allocation, the methodology for calculating income taxes in
an interim period, and the recognition of deferred tax
liabilities for outside basis differences. This ASU also
amends other aspects of the guidance to help simplify and
promote consistent application of Topic 740.
We are currently evaluating the impact of implementing this
guidance on our financial statements.
November 1, 2021
The amendments have
differing adoption
methods, including
retrospectively,
prospectively, and/or on a
modified retrospective
basis.
43
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We have market risk exposure related to interest rates and foreign currency exchange rates. Market risk is
measured as the potential negative impact on earnings, cash flows, or fair values resulting from a hypothetical
change in interest rates or foreign currency exchange rates.
Interest Rate Risk
We are primarily exposed to interest rate risk through our variable rate borrowings under our Amended
Credit Facility, as further described in Note 11, “Credit Facility,” in the Financial Statements. Under the Amended
Credit Facility, the term loan and U.S.-dollar-denominated borrowings under the revolver bear interest at a rate
equal to one-month LIBOR plus a spread. Euro- and sterling-denominated borrowings under the revolver bear at
rate equal to the EURIBOR and SONIA reference rates, respectively, plus a spread. At October 31, 2021, we had
total outstanding borrowings of $888.8 million. To limit exposure to upward movements in interest rates associated
with our floating-rate, LIBOR-based borrowings, we entered into interest rate swap agreements to fix the interest
rates on a portion of our outstanding borrowings. At October 31, 2021, we had interest rate swaps with an
underlying notional amount of $260.0 million and fixed interest rates of 2.84% and 2.86%. Based on our average
borrowings, interest rates, and interest rate swaps in effect at October 31, 2021, a 100 basis point increase in
LIBOR, EURIBOR, and SONIA would decrease our future earnings and cash flows by $7.1 million. For 2020, our
market risk exposure related to interest rate fluctuations was $2.5 million. As actual interest rate movements over
time are uncertain, our interest rate swaps pose potential interest rate risks if interest rates decrease. As of
October 31, 2021, the fair value of our interest rate swap agreements was a liability of $4.6 million.
Foreign Currency Exchange Rate Risk
We are primarily exposed to the impact of foreign exchange rate risk through our U.K. operations where the
functional currency is the GBP. As we intend to remain permanently invested in these foreign operations, we do not
utilize hedging instruments to mitigate foreign currency exchange risks. If we change our intent with respect to such
international investment, we would expect to implement strategies designed to manage those risks in an effort to
mitigate the effect of foreign currency fluctuations on our earnings and cash flows.
44
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
ABM Industries Incorporated:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of ABM Industries Incorporated and subsidiaries
(the Company) as of October 31, 2021 and 2020, the related consolidated statements of comprehensive income
(loss), stockholders’ equity, and cash flows for each of the years in the three‑year period ended October 31, 2021,
and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Company as of October 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years
in the three‑year period ended October 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of October 31, 2021, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated December 22, 2021 expressed an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our
opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Fair value of customer relationship intangible asset from the acquisition of Able
As discussed in Note 4 to the consolidated financial statements, on September 30, 2021, the Company
completed its acquisition of Crown Building Maintenance Co. and Crown Energy Services, Inc. (collectively,
45
Able) for $741.7 million. As a result of the transaction, the Company acquired a customer relationship
intangible asset representing future estimated income from Able’s existing customers. The acquisition-date
preliminary fair value determined for the customer relationship intangible asset was $220.0 million.
We identified the evaluation of the fair value of the customer relationship intangible asset from the
acquisition of Able as a critical audit matter as a high degree of subjectivity was required to evaluate certain
inputs in the discounted cash flow model used to determine the fair value of the asset. Such inputs included
expected future revenue growth, future operating performance margins, customer attrition rate, and
discount rate applied. Changes in these inputs could have a significant impact on the fair value of the
customer relationship intangible asset.
The following are the primary procedures we performed to address this critical audit matter. We evaluated
the design and tested the operating effectiveness of certain internal controls related to the Company’s
acquisition-date valuation process, including controls over the development of the above listed inputs used
to value the customer relationship intangible asset. We evaluated the future revenue growth and future
operating performance margins by comparing these inputs to the historical performance of peer companies
and to the pre-acquisition historical performance of both the Company and Able. We involved valuation
professionals with specialized skills and knowledge who assisted in:
•
•
•
evaluating the estimated annual attrition rate by comparing the selected attrition rate against
historical customer attrition of Able
evaluating the Company’s discount rate by comparing the rate against a discount rate range that
was independently developed
developing a fair value estimate of the customer relationship intangible asset using the Company’s
cash flow projections and independently developed range of discount rates and comparing it to the
Company’s estimate.
Valuation of self-insurance liabilities
As discussed in Notes 2 and 10 to the consolidated financial statements, the Company uses a combination
of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability,
property damage, and other insurable risks. The balance of casualty program insurance reserves, net of
recoverables, as of October 31, 2021 amounted to $508.3 million. The Company engages actuaries to
estimate its self-insurance liabilities at least annually.
We identified the assessment of the valuation of self-insurance liabilities, other than those assumed in the
acquisition of Able, as a critical audit matter. A high degree of judgment and actuarial expertise was required
to assess: (1) the actuarial models used and (2) the estimated incurred but not reported claims based on
application of loss development factors to historical claims experience.
The following are the primary procedures we performed to address this critical audit matter. We evaluated
the design and tested the operating effectiveness of certain internal controls over the Company’s self-
insurance liability process, including controls related to (1) evaluation of claims information sent to the
actuary, (2) estimation of incurred but not reported claims based on the application of loss development
factors to historical claims experience, and (3) evaluation of the actuarial report and the external actuarial
specialist’s qualifications and competency. We evaluated the Company’s historical ability to estimate self-
insurance liabilities by comparing the prior year recorded amounts to the subsequent claim development.
We tested a sample of the claims data utilized by the Company’s actuaries by comparing it to underlying
claims details; and involved an actuarial professional with specialized skills and knowledge who assisted in
the:
•
•
assessment of the actuarial models used by the Company for consistency with generally accepted
actuarial standards and
development of an actuarial estimate of self-insurance liabilities based on the Company’s
underlying historical paid and incurred loss data for comparison with the liabilities recorded by the
Company.
46
/s/ KPMG LLP
We have served as the Company’s auditor since 1980.
New York, New York
December 22, 2021
47
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
ABM Industries Incorporated:
Opinion on Internal Control Over Financial Reporting
We have audited ABM Industries Incorporated and subsidiaries’ (the Company) internal control over financial
reporting as of October 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of October 31, 2021, based
on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of October 31, 2021 and 2020, the related
consolidated statements of comprehensive income, (loss), stockholders’ equity, and cash flows for each of the years
in the three‑year period ended October 31, 2021, and the related notes and financial statement schedule II
(collectively, the consolidated financial statements), and our report dated December 22, 2021 expressed an
unqualified opinion on those consolidated financial statements.
The Company acquired Crown Building Maintenance Co. and Crown Energy Services, Inc. (collectively, “Able”) on
September 30, 2021, and management excluded from its assessment of the effectiveness of the Company’s internal
control over financial reporting as of October 31, 2021, Able’s internal control over financial reporting. Able
represented approximately 4.4% of the Company’s total consolidated assets (excluding goodwill and intangibles,
which are included in the scope of the assessment) and 1.6% of total consolidated revenues as of and for the year
ended October 31, 2021. Our audit of internal control over financial reporting of the Company also excluded an
evaluation of the internal control over financial reporting of Able.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
48
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ KPMG LLP
New York, New York
December 22, 2021
49
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share amounts)
ASSETS
Current assets
Cash and cash equivalents
Trade accounts receivable, net of allowances of $32.7 and $35.5
at October 31, 2021 and 2020, respectively
Costs incurred in excess of amounts billed
Prepaid expenses
Other current assets
Total current assets
Other investments
Property, plant and equipment, net of accumulated depreciation of $274.7 and
$241.3 at October 31, 2021 and 2020, respectively
Right-of-use assets
Other intangible assets, net of accumulated amortization of $389.3 and $343.8
at October 31, 2021 and 2020, respectively
Goodwill
Other noncurrent assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt, net
Trade accounts payable
Accrued compensation
Accrued taxes—other than income
Insurance claims
Income taxes payable
Current portion of lease liabilities
Other accrued liabilities
Total current liabilities
Long-term debt, net
Long-term lease liabilities
Deferred income tax liability, net
Noncurrent insurance claims
Other noncurrent liabilities
Noncurrent income taxes payable
Total liabilities
Commitments and contingencies
Stockholders’ Equity
October 31,
2021
2020
$
62.8 $
394.2
1,137.1
52.5
88.7
60.0
1,401.2
11.8
111.9
126.5
424.8
2,228.9
131.2
4,436.2 $
31.4 $
$
$
289.4
238.0
124.9
171.4
11.4
31.8
387.4
1,285.8
852.8
116.6
22.5
413.3
123.5
12.5
2,827.0
854.2
52.2
85.4
55.9
1,441.9
11.1
133.7
143.1
239.7
1,671.4
136.1
3,776.9
116.7
273.3
187.6
45.5
155.2
6.2
35.0
167.3
986.9
603.0
131.4
10.8
366.3
168.1
10.1
2,276.6
Preferred stock, $0.01 par value; 500,000 shares authorized; none issued
—
—
Common stock, $0.01 par value; 100,000,000 shares authorized;
67,302,449 and 66,748,157 shares issued and outstanding at
October 31, 2021 and 2020, respectively
Additional paid-in capital
Accumulated other comprehensive loss, net of taxes
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
See accompanying notes to consolidated financial statements.
0.7
750.9
(22.5)
880.2
1,609.2
4,436.2 $
0.7
724.1
(30.8)
806.4
1,500.3
3,776.9
50
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions, except per share amounts)
Revenues
Operating expenses
Selling, general and administrative expenses
Restructuring and related expenses
Amortization of intangible assets
Impairment loss of goodwill and other intangibles
Operating profit
Income from unconsolidated affiliates
Interest expense
Income from continuing operations before income taxes
Income tax provision
Income from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income
Other comprehensive income (loss)
Interest rate swaps
Foreign currency translation and other
Income tax (provision) benefit
Comprehensive income (loss)
Net income per common share — Basic
Income from continuing operations
Income from discontinued operations
Net income
Net income per common share — Diluted
Income from continuing operations
Income from discontinued operations
Net income
Weighted-average common and common
equivalent shares outstanding
Basic
Diluted
Years Ended October 31,
2020
2019
2021
$
6,228.6 $
5,258.2
719.2
5,987.6 $
5,157.0
506.1
6,498.6
5,767.5
452.9
—
45.0
—
206.3
2.1
(28.6)
179.8
(53.5)
126.3
—
126.3
4.5
5.3
(1.5)
134.5 $
1.87 $
—
1.87 $
1.86 $
—
1.86 $
7.6
48.4
172.8
95.7
2.2
(44.6)
53.3
(53.1)
0.2
0.1
0.3
(7.6)
(1.8)
2.4
(6.6) $
0.00 $
—
0.00 $
0.00 $
—
0.00 $
67.4
68.0
66.9
67.3
11.2
58.5
—
208.3
3.0
(51.1)
160.2
(32.7)
127.5
(0.1)
127.4
(22.4)
1.6
5.9
112.5
1.92
—
1.91
1.91
—
1.90
66.6
66.9
$
$
$
$
$
See accompanying notes to consolidated financial statements.
51
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions, except per share amounts)
Common Stock
Balance, beginning of year
Stock issued under employee stock purchase and share-based
compensation plans
Repurchase of common stock
Balance, end of year
Additional Paid-in Capital
Balance, beginning of year
Taxes withheld under employee stock purchase and share-
based compensation plans, net
Share-based compensation expense
Repurchase of common stock
Balance, end of year
Accumulated Other Comprehensive Loss, Net of Taxes
Balance, beginning of year
Other comprehensive income (loss)
Balance, end of year
Retained Earnings
Balance, beginning of year
Net income
Dividends
Common stock ($0.760, $0.740, and $0.720 per share)
Stock issued under share-based compensation plans
Cumulative effect adjustment for adoption of ASU 2014-09
Balance, end of year
Total Stockholders’ Equity
Years Ended October 31,
2021
2020
2019
Shares
Amount
Shares
Amount
Shares
Amount
66.7 $
0.6
—
67.3
0.7
—
—
0.7
724.1
(6.7)
33.5
—
750.9
(30.8)
8.2
(22.5)
806.4
126.3
(51.0)
(1.5)
—
880.2
66.6 $
0.3
(0.2)
66.7
0.7
—
—
0.7
708.9
—
20.3
(5.1)
724.1
(23.9)
(6.9)
(30.8)
856.3
0.3
(49.3)
(0.9)
—
806.4
66.0 $
0.6
—
66.6
0.7
—
—
0.7
691.8
(0.3)
17.5
—
708.9
(9.0)
(14.9)
(23.9)
771.2
127.4
(47.7)
(1.0)
6.5
856.3
$ 1,609.2
$ 1,500.3
$ 1,542.0
See accompanying notes to consolidated financial statements.
52
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended October 31,
2021
2020
2019
$
126.3 $
0.3 $
(in millions)
Cash flows from operating activities
Net income
(Income) loss from discontinued operations, net of taxes
Income from continuing operations
Adjustments to reconcile income from continuing operations to net cash provided by
operating activities of continuing operations
Depreciation and amortization
Impairment loss on goodwill and other intangibles
Impairment loss on fixed assets
Deferred income taxes
Share-based compensation expense
Provision for bad debt
Amortization of accumulated other comprehensive gain on interest rate swaps
Discount accretion on insurance claims
Loss (gain) on sale of assets
Reserves on other assets
Income from unconsolidated affiliates
Distributions from unconsolidated affiliates
Changes in operating assets and liabilities, net of effects of acquisitions
Trade accounts receivable and costs incurred in excess of amounts billed
Prepaid expenses and other current assets
Right-of-use assets
Other noncurrent assets
Trade accounts payable and other accrued liabilities
Long-term lease liabilities
Insurance claims
Income taxes payable
Other noncurrent liabilities
Total adjustments
Net cash provided by operating activities of continuing operations
Net cash provided by (used in) operating activities of discontinued operations
Net cash provided by operating activities
Cash flows from investing activities
Additions to property, plant and equipment
Proceeds from sale of assets
Proceeds from redemption of auction rate security
Purchase of business, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities
Taxes withheld from issuance of share-based compensation awards, net
Repurchases of common stock
Dividends paid
Deferred financing costs paid
Borrowings from credit facility
Repayment of borrowings from credit facility
Changes in book cash overdrafts
Financing of energy savings performance contracts
Repayment of finance lease obligations
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
53
—
126.3
89.9
—
9.1
(48.0)
33.5
0.6
(6.4)
0.1
0.2
—
(2.1)
1.9
(124.5)
6.8
19.3
13.8
265.7
(16.3)
(28.4)
8.3
(35.4)
188.0
314.3
—
314.3
(34.3)
4.4
—
(710.2)
(740.0)
(8.1)
—
(51.0)
(6.4)
357.7
(194.2)
(17.9)
15.1
(2.8)
92.4
1.9
(331.4)
394.2
(0.1)
0.2
96.4
172.8
—
(36.6)
20.3
19.6
(6.7)
0.8
2.1
17.6
(2.2)
0.1
141.4
(15.5)
24.4
(10.4)
(53.5)
(22.9)
5.7
7.6
96.2
457.2
457.4
0.1
457.5
(38.0)
5.5
5.0
—
(27.5)
(0.9)
(5.1)
(49.3)
(4.4)
41.2
11.1
(3.4)
(94.1)
(0.2)
335.7
58.5
127.4
0.1
127.5
107.4
—
—
9.7
17.5
6.7
(5.7)
0.8
(0.6)
—
(3.0)
5.4
(78.3)
(13.2)
—
4.5
85.8
—
3.9
3.2
(8.7)
135.3
262.8
(0.1)
262.7
(59.6)
1.3
—
—
(58.3)
(1.3)
—
(47.7)
—
(0.2)
8.1
(3.1)
(184.8)
(0.2)
19.4
39.1
58.5
1,058.5
(1,141.6)
1,755.9
(1,896.5)
$
62.8 $
394.2 $
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
(in millions)
Supplemental cash flow information
Income tax payments, net
Interest paid on credit facility
Years Ended October 31,
2021
2020
2019
$
93.5 $
14.3
82.2 $
32.9
20.6
39.9
See accompanying notes to consolidated financial statements.
54
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND NATURE OF OPERATIONS
ABM is a leading provider of integrated facility services with a mission to make a difference, every person,
every day. We are organized into four industry groups and one Technical Solutions segment:
Through these groups, we offer janitorial, facilities engineering, parking, and specialized mechanical and
electrical technical solutions, on a standalone basis or in combination with other services.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The Financial Statements have been prepared in accordance with United States generally accepted
accounting principles (“U.S. GAAP”) and with the rules and regulations of the SEC, specifically Regulation S-X and
the instructions to Form 10-K. Unless otherwise indicated, all references to years are to our fiscal year, which ends
on October 31.
The Financial Statements include the accounts of ABM and all of our consolidated subsidiaries. We account
for ABM’s investments in unconsolidated affiliates under the equity method of accounting. We include the results of
acquired businesses in the Consolidated Statements of Comprehensive Income (Loss) from their respective
acquisition dates. All intercompany accounts and transactions have been eliminated in consolidation.
The preparation of consolidated financial statements in accordance with U.S. GAAP requires our
management to make certain estimates that affect reported amounts. We base our estimates on historical
experience, known or expected trends, independent valuations, and various other assumptions that we believe to
be reasonable under the circumstances. As future events and their effects cannot be determined with precision,
actual results could differ significantly from these estimates.
We round amounts in the Financial Statements to millions and calculate all percentages and per-share data
from the underlying whole-dollar amounts. Thus, certain amounts may not foot, crossfoot, or recalculate based on
reported numbers due to rounding.
Impact of the Pandemic
COVID-19 has resulted in a worldwide health Pandemic. To date, the Pandemic has surfaced in regions all
around the world and resulted in business slowdowns and shutdowns, as well as global travel restrictions. In these
Financial Statements, we have assessed the current impact of the Pandemic on our financial condition, results of
operations, and cash flows as well as on our estimates, forecasts, and accounting policies. We have made
additional disclosures of these assessments, as necessary. Given the unprecedented nature of this situation, we
cannot reasonably estimate the full impact the Pandemic will have on our financial condition, results of operations,
or cash flows in the foreseeable future. The ultimate impact of the Pandemic on our company is highly uncertain
and will depend on future developments, and such impacts could exist for an extended period of time, even after the
Pandemic subsides.
The Pandemic continues to create a dynamic client environment, and we are working diligently to ensure
our clients’ changing staffing and service needs are met while actively managing direct labor and related personnel
55
costs, including furloughs or reduced hours for certain frontline employees in markets significantly impacted by
business slowdowns and shutdowns.
Refer to additional discussion regarding the Pandemic and the impact on our business throughout this
document, including Note 7, “Fair Value of Financial Instruments,” Note 9, “Goodwill and Other Intangible Assets,”
and Note 11, “Credit Facility.”
Cash and Cash Equivalents
We consider all highly liquid securities with an original maturity of three months or less to be cash and cash
equivalents. As part of our cash management system, we use “zero balance” accounts to fund our disbursements.
Under this system, at the end of each day the bank balance is zero, while the book balance is usually a negative
amount due to reconciling items, such as outstanding checks. We report the changes in these book cash overdrafts
as cash flows from financing activities.
Trade Accounts Receivable and Costs Incurred in Excess of Amounts Billed
Trade accounts receivable arise from services provided to our clients and are usually due and payable on
varying terms from receipt of the invoice to net 90 days, with the exception of certain Technical Solutions project
receivables that may have longer collection periods. These receivables are recorded at the invoiced amount and
normally do not bear interest. In addition, our trade accounts receivable include unbilled receivables, such as
invoices for services that have been provided but are not yet billed.
Costs incurred in excess of amounts billed arise from Technical Solutions project contracts that typically
provide for a schedule of billings or invoices to the client based on our performance to date of specific tasks inherent
in the fulfillment of our performance obligation(s). The schedules for such billings usually do not precisely match the
schedule on which costs are incurred. As a result, revenues generally differ from amounts that can be billed or
invoiced to the client at any point during the contract.
Allowance for Doubtful Accounts
We determine the allowance for doubtful accounts based on historical write-offs, known or expected trends,
and the identification of specific balances deemed uncollectible. For the specifically identified balances, we establish
the reserve upon the earlier of a client’s inability to meet its financial obligations or after a period of 12 months,
unless our management believes such amounts will ultimately be collectible.
Sales Allowance
In connection with our service contracts, we periodically issue credit memos to our clients that are recorded
as a reduction in revenues and an increase to the allowance for billing adjustments. These credits can result from
client vacancy discounts, job cancellations, property damage, and other items. We estimate our potential future
losses on these client receivables based on an analysis of the historical rate of sales adjustments (credit memos,
net of re-bills) and known or expected trends.
Other Current Assets
At October 31, 2021 and 2020, other current assets primarily consisted of other receivables, short-term
insurance recoverables, and capitalized commissions.
Other Investments
At October 31, 2021 and 2020, other investments primarily consisted of investments in unconsolidated
affiliates.
Investments in Unconsolidated Affiliates
We own non-controlling interests (generally 20% to 50%) in certain affiliated entities that predominantly
provide facility solutions to governmental and commercial clients, primarily in the United States and the Middle East.
We account for such investments under the equity method of accounting. We evaluate our equity method
investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of
such investments may not be recoverable. An impairment loss is recognized to the extent that the estimated fair
value of the investment is less than its carrying amount and we determine that the impairment is other than
temporary. At October 31, 2021, 2020, and 2019, our investments in unconsolidated affiliates were $11.7 million,
56
$11.0 million, and $8.9 million, respectively. We did not recognize any impairment charges on these investments in
2021, 2020, or 2019.
Property, Plant and Equipment
We record property, plant and equipment at cost. Repairs and maintenance expenditures are expensed as
incurred. In contrast, we capitalize major renewals or replacements that substantially extend the useful life of an
asset. We determine depreciation for financial reporting purposes using the straight-line method over the following
estimated useful lives:
Category
Computer equipment and software
Machinery and other equipment
Transportation equipment
Buildings
Furniture and fixtures
Years
3–5
3–5
1.5–10
10–40
5
In addition, we depreciate assets under finance leases and leasehold improvements over the shorter of
their estimated useful lives or the remaining lease term. Upon retirement or sale of an asset, we remove the cost
and accumulated depreciation from our Consolidated Balance Sheets. When applicable, we record corresponding
gains or losses within the accompanying Consolidated Statements of Comprehensive Income (Loss).
Leases
We adopted ASU 2016-02, Leases (Topic 842), and all related amendments on November 1, 2019, on a
modified retrospective basis. Comparative prior period Financial Statements for fiscal year 2019 have not been
restated and continue to be reported under the accounting standards in effect for fiscal year 2019. Topic 842
requires lessees to recognize substantially all leases on their balance sheet as a right-of-use (“ROU”) asset and a
lease liability. Upon adoption, we elected the package of transition practical expedients that allowed us to carry
forward prior conclusions related to: (i) whether any expired or existing contracts are or contain leases; (ii) the lease
classification for any expired or existing leases; and (iii) initial direct costs for existing leases. Additionally, we
elected the practical expedient of not separating lease components from non-lease components for all asset
classes. We also made an accounting policy election to not record ROU assets or lease liabilities for leases with an
initial term of 12 months or less and will recognize payments for such leases in our Consolidated Statements of
Comprehensive Income (Loss) on a straight-line basis over the lease term. We did not elect the use of hindsight for
determining the reasonably certain lease term.
We enter into various noncancelable lease agreements for office space, parking facilities, warehouses,
vehicles, and equipment used in the normal course of business. We determine if an arrangement is a lease at
inception and begin recording lease activity at the commencement date, which is generally the date in which we
take possession of or control the physical use of the asset. ROU assets and lease liabilities are recognized based
on the present value of lease payments over the lease term with lease expense recognized on a straight-line basis.
We use our incremental borrowing rate to determine the present value of future lease payments unless the implicit
rate in a lease is readily determinable. Our incremental borrowing rate is the rate of interest we would have to pay to
borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic
environment. This incremental borrowing rate is applied to the minimum lease payments within each lease
agreement to determine the amounts of our ROU assets and lease liabilities. Our incremental borrowing rate as of
November 1, 2019, was utilized for the initial measurement of operating lease liabilities upon adoption of Topic 842.
Our lease terms range from one to 30 years. Some leases include one or more options to renew, with
renewal terms that can extend the lease term. We typically include options to extend the lease in a lease term when
it is reasonably certain that we will exercise that option and when doing so is at our sole discretion. Certain
equipment and vehicle leases may also include options to purchase the leased property. The depreciable life of
assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or
purchase option reasonably certain of exercise. Typically, if we decide to cancel or terminate a lease before the end
of its term, then we would owe the lessor the remaining lease payments under the term of such lease. Our lease
agreements generally do not contain any material residual value guarantees or material restrictive covenants. We
may rent or sublease certain real estate assets that we no longer use to third parties.
57
Lease agreements may contain rent escalation clauses, rent holidays, or certain landlord incentives,
including tenant improvement allowances. Prior to November 1, 2019, we recognized lease expense related to
operating leases on a straight-line basis over the terms of the leases and, accordingly, recorded the difference
between cash rent payments and recognition of rent expense as a deferred rent liability or prepaid rent. Landlord-
funded leasehold improvements were also recorded as deferred rent liabilities and were amortized as a reduction of
rent expense over the noncancelable term of the related operating lease. The ROU assets recognized upon
adoption of Topic 842 included: cumulative prepaid or accrued rent on the adoption date, unamortized lease
incentives, and unamortized initial direct costs initially recognized prior to adoption of Topic 842. Following adoption
of Topic 842, ROU assets include amounts for scheduled rent increases and are reduced by lease incentive
amounts.
Certain of our lease agreements include variable rent payments, consisting primarily of rental payments
adjusted periodically for inflation and amounts paid to the lessor based on cost or consumption, such as
maintenance and utilities. These costs are expensed as incurred. Certain of our parking arrangements also contain
variable rent payments that are a percentage of parking services revenue based on contractual levels. We record
contingent rent as it becomes probable that specified targets will be met. Variable rent lease components are not
included in the lease liability.
Service concession arrangements within the scope of ASU No. 2017-10, Service Concession Arrangements
(Topic 853): Determining the Customer of the Operation Services, are excluded from the scope of Topic 842. Lease
costs associated with these arrangements are recorded as a reduction of revenues. See Note 3, “Revenues,” for
further discussion.
Goodwill and Other Intangible Assets
Goodwill represents the excess purchase price of acquired businesses over the fair value of the assets
acquired and liabilities assumed. We have elected to make the first day of our fourth quarter, August 1, the annual
impairment assessment date for goodwill. However, we could be required to evaluate the recoverability of goodwill
more often if impairment indicators exist. Goodwill is tested for impairment at a “reporting unit” level by performing
either a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We
may elect not to perform the qualitative assessment for some or all reporting units and instead perform a
quantitative test under which we estimate the fair value using a weighting of fair values derived from an income
approach and a market approach. The discounted estimates of future cash flows include significant management
assumptions, such as revenue growth rates, operating margins, weighted average cost of capital, and future
economic and market conditions.
Other intangible assets primarily consist of acquired customer contracts and relationships that are
amortized using the sum-of-the-years’-digits method over their useful lives, consistent with the estimated useful life
considerations used in the determination of their fair values. This accelerated method of amortization reflects the
pattern in which the economic benefits from the intangible assets of customer contracts and relationships are
expected to be realized. We amortize other non-customer acquired intangibles using a straight-line method of
amortization. We evaluate other intangible assets, as well as our long-lived assets, for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. When this
occurs, a recoverability test is performed that compares the projected undiscounted cash flows from the use and
eventual disposition of an asset or asset group to its carrying amount. If the projected undiscounted cash flows are
less than the carrying amount, then we calculate an impairment loss. The impairment loss calculation compares the
fair value, which is based on projected discounted cash flows, to the carrying value.
See Note 9, “Goodwill and Other Intangible Assets,” for further information on goodwill, other intangible
assets, and impairment charges.
Other Noncurrent Assets
At October 31, 2021 and 2020, other noncurrent assets primarily consisted of long-term insurance
recoverables, deferred charges, capitalized commissions, ESPC receivables, insurance and other long-term
deposits, and prepayments to carriers for future insurance claims.
58
Federal Energy Savings Performance Contract Receivables
As part of our Technical Solutions business, we enter into ESPCs with the federal government pursuant to
which we agree to develop, design, engineer, and construct a project and to guarantee that the project will satisfy
agreed-upon performance standards. ESPC receivables represent the amount to be paid by various federal
government agencies for work we have satisfactorily performed under specific ESPCs. We assign certain of our
rights to receive those payments to unaffiliated third parties that provide construction financing, which we record as
a liability, for such contracts. This construction financing is recorded as cash flows from financing activities, while the
use of the cash received to pay project costs under these arrangements is classified as operating cash flows. The
ESPC receivable is recognized as revenue as each project is constructed. Upon completion and acceptance of the
project by the government and upon satisfaction of true sale criteria, the assigned ESPC receivable from the
government and corresponding ESPC liability are eliminated from our consolidated financial statements.
Fair Value of Financial Instruments
Fair value is the price we would receive to sell an asset or pay to transfer a liability in an orderly transaction
with a market participant at the measurement date. In the absence of active markets for identical assets or liabilities,
such measurements involve developing assumptions based on market observable data and, in the absence of such
data, internal information that is consistent with what market participants would use in a hypothetical transaction that
occurs at the measurement date.
Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect
our market assumptions. Preference is given to observable inputs. These two types of inputs create the following
fair value hierarchy:
Level 1 – Quoted prices for identical instruments in active markets;
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations whose inputs are observable or
whose significant value drivers are observable; and
Level 3 – Significant inputs to the valuation model are unobservable.
We evaluate assets and liabilities subject to fair value measurements on a recurring and non-recurring
basis to determine the appropriate level at which to classify them for each reporting period. Some non-financial
assets are measured at fair value on a non-recurring basis only in certain circumstances, including the event of
impairment. See Note 7, “Fair Value of Financial Instruments,” for the fair value hierarchy table and for details on
how we measure fair value for our assets and liabilities.
Insurance Reserves
We use a combination of insured and self-insurance programs to cover workers’ compensation, general
liability, automobile liability, property damage, and other insurable risks. Insurance claim liabilities represent our
estimate of retained risks without regard to insurance coverage. We retain a substantial portion of the risk related to
certain workers’ compensation and medical claims. Liabilities associated with these losses include estimates of both
filed claims and IBNR Claims.
With the assistance of third-party actuaries, we review our estimate of ultimate losses for IBNR Claims on a
quarterly basis and adjust our required self-insurance reserves as appropriate. See Note 10, “Insurance,” for further
details on the quarterly review procedures. As part of this evaluation, we review the status of existing and new claim
reserves as established by third-party claims administrators. The third-party claims administrators establish the case
reserves based upon known factors related to the type and severity of the claims, demographic factors, legislative
matters, and case law, as appropriate. We compare actual trends to expected trends and monitor claims
developments. The specific case reserves estimated by the third-party administrators are provided to an actuary
who assists us in projecting an actuarial estimate of the overall ultimate losses for our self-insured or high
deductible programs, which includes the case reserves plus an actuarial estimate of reserves required for additional
developments, such as IBNR Claims. We utilize the results of actuarial studies to estimate our insurance rates and
insurance reserves for future periods and to adjust reserves, if appropriate, for prior years.
In general, our insurance reserves are recorded on an undiscounted basis. We allocate current-year
insurance expense to our operating segments based upon their underlying exposures, while actuarial adjustments
related to prior year claims are recorded within Corporate expenses. We classify claims as current or long-term
59
based on the expected settlement date. Estimated insurance recoveries related to recorded liabilities are reflected
as assets in our Consolidated Balance Sheets when we believe the receipt of such amounts is probable.
Other Accrued Liabilities
At October 31, 2021 and 2020, other accrued liabilities primarily consisted of legal fees and settlements,
other accrued expenses (which include the current portion of deferred payroll taxes), employee benefits, contract
liabilities (which include deferred revenue and progress billings in excess of costs), unclaimed property, dividends
payable, and insurance claims.
Other Noncurrent Liabilities
At October 31, 2021 and 2020, other noncurrent liabilities primarily consisted of noncurrent deferred payroll
taxes, deferred compensation, ESPC liabilities, retirement plan liabilities, long-term finance leases, and warranty
reserves.
Contracts with Customers
We account for a contract when it has approval and commitment from both parties, the rights of the parties
are identified, payment terms are identified, the contract has commercial substance, and collectability of
consideration is probable. Once a contract is identified, we evaluate whether it is a combined or single contract and
whether it should be accounted for as more than one performance obligation. Generally, most of our contracts are
cancelable by either party without a substantive penalty, and the majority of our contracts have a notification period
of 30 to 60 days. If a contract includes a cancellation clause, the remaining contract term is limited to the required
termination notice period.
At contract inception, we assess the services promised to our customers and identify a performance
obligation for each promise to transfer to the customer a service, or a bundle of services, that is distinct. To identify
the performance obligation, we consider all of our services promised in the contract, regardless of whether they are
explicitly stated or are implied by customary business practices.
The majority of our contracts contain multiple promises that represent an integrated bundle of services
comprised of activities that may vary over time; however, these activities fulfill a single integrated performance
obligation since we perform a continuous service that is substantially the same and has the same pattern of transfer
to the customer. Our performance obligations are primarily satisfied over time as we provide the related services.
We allocate the contract transaction price to this single performance obligation and recognize revenue as the
services are performed, as further described in “Contract Types” below.
Certain arrangements involve variable consideration (primarily per transaction fees, reimbursable expenses,
and sales-based royalties). We do not estimate the variable consideration for these arrangements; rather, we
recognize these variable fees in the period they are earned. Some of our contracts, often related to Airline Services,
may also include performance incentives based on variable performance measures that are ascertained exclusively
by future performance and therefore cannot be estimated at contract inception and are recognized as revenue once
known and mutually agreed upon. We include estimated amounts in the transaction price to the extent it is probable
that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the
variable consideration is resolved. Our estimates of variable consideration and determination of whether to include
estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and
all information (historical, current, and forecasted) that is reasonably available to us.
We primarily account for our performance obligations under the series guidance, using the as-invoiced
practical expedient when applicable. We apply the as-invoiced practical expedient to record revenue as the services
are provided, given the nature of the services provided and the frequency of billing under the customer contracts.
Under this practical expedient, we recognize revenue in an amount that corresponds directly with the value to the
customer of our performance completed to date and for which we have the right to invoice the customer.
We typically bill customers on a monthly basis and have the right to consideration from customers in an
amount that corresponds directly with the performance obligation satisfied to date. The time between completion of
the performance obligation and collection of cash is generally 30 to 60 days. Sales-based taxes are excluded from
revenue.
Contracts generally can be modified to account for changes in specifications and requirements. We
consider contract modifications to exist when the modification either changes the consideration, creates new
60
performance obligations, or changes the existing scope of the contract and related performance obligations.
Historically, contract modifications have been for services that are not distinct from the existing contract, since we
are providing a bundle of services that are highly interrelated, and are therefore treated as if they were part of that
existing contract. Such modifications are generally accounted for prospectively as part of the existing contract.
Contract Types
We have arrangements under various contract types, as described below.
Monthly Fixed-Price
Monthly fixed-price arrangements are contracts in which the client agrees to pay a fixed fee every month
over a specified contract term. We measure progress toward satisfaction of the performance obligation as the
services are provided, and revenue is recognized at the agreed-upon contractual amount over time, because the
customer simultaneously receives and consumes the benefits of the services as they are performed.
Square-Foot
Square-foot arrangements are contracts in which the client agrees to pay a fixed fee every month based on
the actual square footage serviced over a specified contract term. We measure progress toward satisfaction of the
performance obligation as the services are provided, and revenue is recognized at the agreed-upon contractual
amount over time, because the customer simultaneously receives and consumes the benefits of the services as
they are performed.
Cost-Plus
Cost-plus arrangements are contracts in which the clients reimburse us for the agreed-upon amount of
wages and benefits, payroll taxes, insurance charges, and other expenses associated with the contracted work,
plus a profit margin. We measure progress toward satisfaction of the performance obligation as the services are
provided, and revenue is recognized at the agreed-upon contractual amount over time, because the customer
simultaneously receives and consumes the benefits of the services as they are performed.
Work Orders
Work orders generally consist of supplemental services requested by clients outside of the standard service
specification and include cleanup after tenant moves, construction cleanup, flood cleanup, and snow removal. The
nature of these short-term contracts involves performing one-off type services, and revenue is recognized at the
agreed-upon contractual amount over time as the services are provided, because the customer simultaneously
receives and consumes the benefits of the services as they are performed.
Transaction-Price
Transaction-price contracts are arrangements in which customers are billed a fixed price for each
transaction performed on a monthly basis (e.g., wheelchair passengers served, airplane cabins cleaned). We
measure progress toward satisfaction of the performance obligation as the services are provided, and revenue is
recognized at the agreed-upon contractual amount over time, because the customer simultaneously receives and
consumes the benefits of the services as they are performed.
Hourly
Hourly arrangements are contracts in which the client is billed a fixed hourly rate for each labor hour
provided. We measure progress toward satisfaction of the performance obligation as the services are provided, and
revenue is recognized at the agreed-upon contractual amount over time, because the customer simultaneously
receives and consumes the benefits of the services as they are performed.
Management Reimbursement
Under management reimbursement arrangements, we manage a parking facility for a management fee and
pass through the revenue and expenses associated with the facility to the owner. We measure progress toward
satisfaction of the performance obligation over time as the services are provided. Under these contracts we
recognize both revenues and expenses, in equal amounts, that are directly reimbursed from the property owner for
operating expenses, as such expenses are incurred. Such revenues do not include gross customer collections at
the managed locations, because they belong to the property owners. We have determined we are the principal in
61
these transactions, because the nature of our performance obligation is for us to provide the services on behalf of
the customer and we have control of the promised services before they are transferred to the customer.
Leased Location
Under leased location parking arrangements, we pay a fixed amount of rent, plus a percentage of revenues
derived from monthly and transient parkers, to the property owner. We retain all revenues received and we are
responsible for most operating expenses incurred. We measure progress toward satisfaction of the performance
obligation as the services are provided, and revenue is recognized over time, because the customer simultaneously
receives and consumes the benefits of the services as they are performed.
Rental expense and certain other expenses under contracts that meet the definition of service concession
arrangements are recorded as a reduction of revenue.
Allowance
Under allowance parking arrangements, we are paid a fixed amount or hourly rate to provide parking
services, and we are responsible for certain operating expenses that are specified in the contract. We measure
progress toward satisfaction of the performance obligation as the services are provided, and revenue is recognized
at the agreed-upon contractual rate over time, because the customer simultaneously receives and consumes the
benefits of the services as they are performed.
Energy Savings Contracts and Fixed-Price Repair and Refurbishment
Under energy savings contracts and fixed-price repair and refurbishment arrangements, we agree to
develop, design, engineer, and construct a project. Additionally, as part of bundled energy solutions arrangements,
we guarantee the project will satisfy agreed-upon performance standards.
We use the cost-to-cost method, which compares the actual costs incurred to date with the current estimate
of total costs to complete, to measure the satisfaction of the performance obligation and recognize revenue as work
progresses and we incur costs on our contracts; we believe this method best reflects the transfer of control to the
customer. This measurement and comparison process requires updates to the estimate of total costs to complete
the contract, and these updates may include subjective assessments and judgments. Equipment purchased for
these projects is project-specific and considered a value-added element to our work. Equipment costs are incurred
when title is transferred to us, typically upon delivery to the work site. Revenue for uninstalled equipment is
recognized at cost and the associated margin is deferred until installation is substantially complete.
We recognize revenue over time for all of our services as we perform them, because (i) control continuously
transfers to the customer as work progresses or (ii) we have the right to bill the customer as costs are incurred. The
customer typically controls the work in process, as evidenced either by contractual termination clauses or by our
rights to payment for work performed to date plus a reasonable profit to deliver products or services that do not
have an alternative use to us.
Certain project contracts include a schedule of billings or invoices to the customer based on our job-to-date
percentage of completion of specific tasks inherent in the fulfillment of our performance obligation(s) or in
accordance with a fixed billing schedule. Fixed billing schedules may not precisely match the actual costs incurred.
Therefore, revenue recognized may differ from amounts that can be billed or invoiced to the customer at any point
during the contract, resulting in balances that are considered revenue recognized in excess of cumulative billings or
cumulative billings in excess of revenue recognized. Advanced payments from our customers generally do not
represent a significant financing component as the payments are used to meet working capital demands that can be
higher in the early stages of a contract, as well as to protect us from our customer failing to meet its obligations
under the contract.
Certain projects include service maintenance agreements under which existing systems are repaired and
maintained for a specific period of time. We generally recognize revenue under these arrangements over time. Our
service maintenance agreements are generally one-year renewable agreements.
Franchise
We franchise certain engineering services through individual and area franchises under the Linc Service
and TEGG brands, which are part of ABM Technical Solutions. Initial franchise fees result from the sale of a
franchise license and include the use of the name, trademarks, and proprietary methods. The franchise license is
62
considered symbolic intellectual property, and revenue related to the sale of this right is recognized at the agreed-
upon contractual amount over the term of the initial franchise agreement.
Royalty fee revenue consists of sales-based royalties received as part of the consideration for the franchise
right, which is calculated as a percentage of the franchisees’ revenue. We recognize royalty fee revenue at the
agreed-upon contractual rates over time as the customer revenue is generated by the franchisees. A receivable is
recognized for an estimate of the unreported royalty fees, which are reported and remitted to us in arrears.
Costs to Obtain a Contract With a Customer
We capitalize the incremental costs of obtaining a contract with a customer, primarily commissions, as
contract assets and recognize the expense on a straight-line basis over a weighted average expected customer
relationship period. Capitalized commissions are classified as current or noncurrent based on the timing of when we
expect to recognize the expense.
Contract Balances
The timing of revenue recognition, billings, and cash collections results in contract assets and contract
liabilities, as further explained below. The timing of revenue recognition may differ from the timing of invoicing to
customers. If a contract includes a cancellation clause that allows for the termination of the contract by either party
without a substantive penalty, then the contract term is limited to the termination notice period.
Contract assets primarily consist of billed trade receivables, unbilled trade receivables, and costs incurred in
excess of amounts billed. Billed and unbilled trade receivables represent amounts from work completed in which we
have an unconditional right to bill our customer. Costs incurred in excess of amounts billed typically arise when the
revenue recognized on projects exceeds the amount billed to the customer. These amounts are transferred to billed
trade receivables when the rights become unconditional. Contract assets also include the capitalization of
incremental costs of obtaining a contract with a customer, primarily commissions.
Contract liabilities consist of deferred revenue and advance payments and billings in excess of revenue
recognized. We generally classify contract liabilities as current since the related contracts are generally for a period
of one year or less. Contract liabilities decrease as we recognize revenue from the satisfaction of the related
performance obligation.
Management Reimbursement Revenue by Segment
(in millions)
Business & Industry
Aviation
Total
Restructuring and Related Expenses
Years Ended October 31,
2021
2020
2019
$
$
185.8 $
221.4 $
54.5
74.3
240.3 $
295.6 $
283.1
95.5
378.7
We may periodically engage in various restructuring activities intended to drive long-term profitable growth
and increase operational efficiency, which can include streamlining and realigning our overall organizational
structure and reallocating resources. Our most recent restructuring program was primarily associated with
integrating our acquisition of GCA and reorganizing our healthcare business. During 2020 and 2019, restructuring
expenses were $7.6 million and $11.2 million, respectively. By the end of 2020, we had substantially completed the
restructuring program.
Restructuring and related expenses include employee severance, external support fees, lease exit costs,
and other costs. Our methodology to record these costs is described below.
Severance
As we do not have a history of consistently providing severance benefits, we recognize severance costs for
employees who do not have formal employment agreements when management has committed to a restructuring
plan and communicated those actions to impacted employees, such that the employee is able to determine the type
and amount of benefits that they will receive upon termination. In addition, if the employees are required to render
service beyond the minimum retention period until they are terminated in order to receive the benefits, then a liability
63
is recognized ratably over the future service period. For employees with employment agreements, we accrue for
these severance liabilities when it is probable that the impacted employee will be entitled to the benefits and the
amount can be reasonably estimated.
Advertising
Advertising costs are expensed as incurred. During 2021, 2020, and 2019, advertising expense was $6.2
million, $1.8 million, and $1.7 million, respectively.
Share-Based Compensation
Our current share-based awards principally consist of restricted stock units (“RSUs”) and various
performance share awards. We recognize compensation costs associated with these awards in selling, general and
administrative expenses. For RSUs and certain performance share awards, the amount of compensation cost is
measured based on the grant-date fair value of the equity instruments issued. Since our total shareholder return
(“TSR”) performance share awards are performance awards with a market condition, the compensation costs
associated with these awards are determined using a Monte Carlo simulation valuation model. For RSUs and TSR
awards, compensation cost is recognized over the period that an employee provides service in exchange for the
award. We recognize compensation cost associated with other performance share awards over the requisite service
period based on the probability of achievement of performance criteria.
Taxes Collected from Clients and Remitted to Governmental Agencies
We record taxes on client transactions due to governmental agencies as receivables and liabilities on the
Consolidated Balance Sheets.
Net Income Per Common Share
Basic net income per common share is net income divided by the weighted-average number of common
shares outstanding during the period. Diluted net income per common share is based on the weighted-average
number of common shares outstanding during the period, adjusted to include the potential dilution from the
conversion of RSUs, vesting of performance shares, and exercise of stock options.
Contingencies and Litigation
We are a party to a number of lawsuits, claims, and proceedings incident to the operation of our business,
including those pertaining to labor and employment, contracts, personal injury, and other matters, some of which
allege substantial monetary damages. Some of these actions may be brought as class actions on behalf of a class
or purported class of employees. We accrue for loss contingencies when losses become probable and are
reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better
estimate, then the minimum amount of the range is recorded as a liability. We recognize legal costs as an expense
in the period incurred.
Income Taxes
We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to temporary differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax bases. We measure deferred tax assets
and liabilities using enacted tax rates expected to be applied to taxable income in the years in which those
temporary differences are expected to be recovered. Deferred tax assets are reviewed for recoverability on a
quarterly basis. A valuation allowance is recorded to reduce the carrying amount of a deferred tax asset to its
realizable value unless it is more likely than not that such asset will be realized. We recognize accrued interest and
penalties related to unrecognized tax benefits in income tax expense in our Consolidated Statements of
Comprehensive Income (Loss).
Recently Adopted Accounting Standards
The Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments—
Credit Losses (Topic 326) in June 2016 and subsequently issued these amendments to the initial guidance: ASU
2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, and ASU 2020-03 (collectively, “Topic 326”). Topic 326
replaces the existing incurred loss impairment model with a methodology that incorporates all expected credit loss
estimates, resulting in more timely recognition of losses. Under Topic 326, an organization is required to measure all
64
expected credit losses for financial assets held at the reporting date based on historical experience, current
conditions, and reasonable and supportable forecasts that affect the collectability of the reported financial assets. It
also requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit
losses. We adopted this standard effective November 1, 2020, on a modified retrospective basis. The asset and
liability classes that we have identified to be in the scope of Topic 326 at the time of the adoption are trade accounts
receivable, costs incurred in excess of amounts billed, guarantees, reinsurance recoverables, and notes receivable.
The adoption of this standard did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use
Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That Is a Service Contract. This accounting update aligns the requirements for capitalizing
implementation costs incurred in a hosting arrangement that is a service contract with the requirements for
capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance also specifies
that the presentation of capitalized implementation costs and the related amortization on the balance sheet, income
statement, and statement of cash flows should align with the presentation of the hosting (service) element of the
arrangement. We adopted this standard effective November 1, 2020, on a prospective basis. The adoption of the
standard did not have a material impact on our consolidated financial statements.
No other recently adopted accounting standards have had a significant impact on our fiscal 2021
consolidated financial statements
Recently Issued Accounting Standards
We do not expect any recently issued accounting pronouncements to have a material impact on our
consolidated financial statements and related disclosures.
65
3. REVENUES
Disaggregation of Revenues
We generate revenues under several types of contracts, which are further described in Note 2, “Basis of
Presentation and Significant Accounting Policies.” Generally, the type of contract is determined by the nature of the
services provided by each of our major service lines throughout our reportable segments; therefore, we
disaggregate revenues from contracts with customers into major service lines. We have determined that
disaggregating revenues into these categories best depicts how the nature, amount, timing, and uncertainty of
revenues and cash flows are affected by economic factors. Our reportable segments are B&I, T&M, Education,
Aviation, and Technical Solutions, as described in Note 17, “Segment and Geographic Information.”
(in millions)
Major Service Line
Janitorial(1)
Parking(2)
Facility Services(3)
Building & Energy Solutions(4)
Airline Services(5)
Elimination of inter-segment revenues
Total
(in millions)
Major Service Line
Janitorial(1)
Parking(2)
Facility Services(3)
Building & Energy Solutions(4)
Airline Services(5)
Elimination of inter-segment revenues
Total
Year Ended October 31, 2021
B&I
T&M
Education
Aviation
Technical
Solutions
Total
$ 2,651.7 $
296.9
397.4
—
0.5
$ 3,346.5 $
790.5 $
39.8
156.8
—
—
987.1 $
730.8 $
0.9
104.7
—
—
836.4 $
117.2 $
261.8
28.9
—
260.9
668.8 $
— $ 4,290.3
599.4
—
687.8
—
534.0
534.0
261.4
—
534.0 $ 6,372.9
(144.2)
$ 6,228.6
Year Ended October 31, 2020
B&I
T&M
Education
Aviation
Technical
Solutions
Total
$ 2,420.4 $
362.8
374.1
—
0.4
$ 3,157.8 $
770.9 $
33.5
151.6
—
—
956.0 $
716.5 $
1.8
90.5
—
—
808.8 $
121.2 $
255.9
31.6
—
272.2
680.9 $
— $ 4,029.0
654.0
—
647.9
—
506.6
506.6
272.6
—
506.6 $ 6,110.0
(122.4)
$ 5,987.6
(1) Janitorial arrangements provide a wide range of essential cleaning services for commercial office buildings, airports and other
transportation centers, educational institutions, government buildings, health facilities, industrial buildings, retail stores, and
stadiums and arenas. These arrangements are often structured as monthly fixed-price, square-foot, cost-plus, and work order
contracts.
(2) Parking arrangements provide parking and transportation services for clients at various locations, including airports and other
transportation centers, commercial office buildings, educational institutions, health facilities, hotels, and stadiums and arenas.
These arrangements are structured as management reimbursement, leased location, and allowance contracts. Certain of
these arrangements are considered service concession agreements and are accounted for under the guidance of Topic 853;
accordingly, rent expense related to these arrangements is recorded as a reduction of the related parking service revenues.
(3) Facility Services arrangements provide onsite mechanical engineering and technical services and solutions relating to a broad
range of facilities and infrastructure systems that are designed to extend the useful life of facility fixed assets, improve
equipment operating efficiencies, reduce energy consumption, lower overall operational costs for clients, and enhance the
sustainability of client locations. These arrangements are generally structured as monthly fixed-price, cost-plus, and work order
contracts.
(4) Building & Energy Solutions arrangements provide custom energy solutions, electrical, HVAC, lighting, electric vehicle
charging station installation, and other general maintenance and repair services for clients in the public and private sectors and
are generally structured as Energy Savings and Fixed-Price Repair and Refurbishment contracts. We also franchise certain
operations under franchise agreements relating to our Linc Network and TEGG brands pursuant to franchise contracts.
66
(5) Airline Services arrangements support airlines and airports with services such as passenger assistance, catering logistics, and
airplane cabin maintenance. These arrangements are often structured as monthly fixed-price, cost-plus, transaction price, and
hourly contracts.
Remaining Performance Obligations
At October 31, 2021, performance obligations that were unsatisfied or partially unsatisfied for which we
expect to recognize revenue totaled $307.2 million. We expect to recognize revenue on approximately 79% of the
remaining performance obligations over the next 12 months, with the remainder recognized thereafter, based on our
estimates of project timing.
These amounts exclude variable consideration primarily related to: (i) contracts where we have determined
that the contract consists of a series of distinct service periods and revenues are based on future performance that
cannot be estimated at contract inception; (ii) parking contracts where we and the customer share the gross
revenues or operating profit for the location; and (iii) contracts where transaction prices include performance
incentives that are based on future performance and therefore cannot be estimated at contract inception. We apply
the practical expedient that permits exclusion of information about the remaining performance obligations with
original expected durations of one year or less.
Contract Balances
The following tables present the balances in our contract assets and contract liabilities:
(in millions)
Contract assets
Billed trade receivables(1)
Unbilled trade receivables(1)
Costs incurred in excess of amounts billed(2)
Capitalized commissions(3)
October 31, 2021
October 31, 2020
$
1,057.6 $
112.1
52.5
27.8
835.8
53.9
52.2
25.2
(1) Included in trade accounts receivable, net, on the Consolidated Balance Sheets. The fluctuations correlate directly to the
execution of new customer contracts and to invoicing and collections from customers in the normal course of business.
(2) Fluctuation is primarily due to the timing of payments on our contracts measured using the cost-to-cost method of revenue
recognition.
(3) Included in other current assets and other noncurrent assets on the Consolidated Balance Sheets. During the year ended
October 31, 2021, we capitalized $16.3 million of new costs and amortized $13.7 million of previously capitalized costs. There
was no impairment loss recorded on the costs capitalized.
(in millions)
Contract liabilities(1)
Balance at beginning of year
Additional contract liabilities
Recognition of deferred revenue
Balance at end of year
(1) Included in other accrued liabilities on the Consolidated Balance Sheets.
Year Ended
October 31, 2021
$
$
36.4
248.9
(226.8)
58.5
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4. ACQUISITIONS
Acquisition of Able
On September 30, 2021, we completed the Able Acquisition for a net cash purchase price of $741.7 million.
Pursuant to the terms of the purchase agreement, approximately $12.1 million of the cash consideration was placed
into escrow accounts, of which approximately $8.2 million was placed into escrow to satisfy any applicable
indemnification claims for a period of 12 months. To fund the cash purchase price, we used cash on hand and
borrowed $325.0 million on September 30, 2021, at an average interest rate of 1.58% from our revolving line of
credit.
Preliminary Acquisition Accounting
The assets acquired and liabilities assumed were recognized at their acquisition date fair values. The
acquisition accounting is subject to change as the Company obtains additional information during the measurement
period about the facts and circumstances that existed as of the acquisition date. The final acquisition accounting
may include changes to customer relationships, goodwill, deferred taxes, legal matters, insurance claims reserves,
and other liabilities. Goodwill arising from the Able Acquisition is not deductible for tax reporting purposes.
The following table summarizes the preliminary acquisition accounting based on currently available
information:
(in millions)
Cash and cash equivalents
Trade accounts receivable(1)
Other assets
Customer relationships(2)
Trade names(2)
Goodwill(3)
Trade accounts payable
Accrued compensation
Insurance claims
Other liabilities
Deferred income tax liability, net
Net assets acquired
$
$
31.5
159.3
24.9
220.0
10.0
554.0
(27.0)
(38.2)
(91.6)
(41.7)
(59.5)
741.7
(1) The gross amount of trade accounts receivable was $160.6 million, of which $1.4 million was deemed uncollectible at October
31, 2021.
(2) The amortization periods for the acquired intangible assets are 15 years for customer relationships and 2 years for trade
names.
(3) Goodwill is largely attributable to value we expect to obtain from long-term business growth, the established workforce, and
buyer-specific synergies. This goodwill is not deductible for income tax purposes.
Financial Information
The Consolidated Statements of Comprehensive Income (Loss) for the fiscal year ended October 31, 2021,
includes $101.1 million of revenue and $4.4 million of net income attributable to the operations of Able since the
acquisition date. The operations of Able are included in our B&I segment.
The following table presents our unaudited pro forma results for 2021 and 2020 as though the Able
Acquisition occurred on November 1, 2019. These results include adjustments for the estimated amortization of
intangible assets, interest expense, and the income tax impact of the pro forma adjustments at the statutory rate of
28%. These unaudited pro forma results do not reflect the cost of integration activities or benefits from expected
revenue enhancements and synergies.
68
(in millions)
Pro forma revenue
Pro forma income (loss) from continuing operations(1)
Years Ended October 31,
2021
2020
$
7,223.2 $
139.1
7,078.2
(7.9)
(1) These results were adjusted to exclude $17.3 million of acquisition-related costs incurred during 2021, which are included in
selling, general and administrative expenses in the accompanying Consolidated Statements of Comprehensive Income (Loss).
5. LEASES
The components of lease assets and liabilities and their classification on our Consolidated Balance Sheets
were as follows:
(in millions)
Lease assets
Operating leases
Finance leases
Total lease assets
Lease liabilities
Current liabilities
Classification
October 31, 2021
October 31, 2020
Right-of-use assets
Property, plant and equipment, net(1)
$
$
126.5 $
3.7
130.2 $
31.8 $
0.4
116.6
2.0
143.1
6.1
149.2
35.0
2.3
131.4
2.8
171.4
Operating leases
Current portion of lease liabilities
$
Finance leases
Other accrued liabilities
Noncurrent liabilities
Operating leases
Long-term lease liabilities
Finance leases
Other noncurrent liabilities
Total lease liabilities
$
150.8 $
(1) Finance lease assets are recorded net of accumulated amortization of $16.3 million and $13.6 million as of October 31, 2021
and October 31, 2020, respectively.
The components of lease costs and classification within the Consolidated Statements of Comprehensive
Income (Loss) were as follows:
Year Ended
October 31, 2021
Years Ended
October 31, 2020
$
$
51.9 $
25.3
2.5
0.5
80.2 $
67.9
28.5
3.5
0.5
100.4
(in millions)
Operating lease costs:
Operating expenses(1)(2)
Selling, general and administrative expenses(3)
Finance lease costs:
Operating expenses(4)
Interest expense(5)
Total lease costs
(1) Related to certain parking arrangements.
(2) Includes short-term lease costs and variable lease costs.
(3) Includes short-term lease costs.
(4) Represents amortization of leased assets.
(5) Interest on lease liabilities.
69
The following table presents information on short-term and variable lease costs:
(in millions)
Short-term lease costs
Variable lease costs
Total short-term and variable lease costs
Year Ended
October 31, 2021
Year Ended
October 31, 2020
$
$
34.8 $
3.7
38.5 $
47.0
3.5
50.5
Sublease income generated during the year ended October 31, 2021, was immaterial. We continue to
monitor the impact of the Pandemic on our subleases; however, we do not expect a significant impact.
The amounts of future undiscounted cash flows related to the lease payments over the lease terms and the
reconciliation to the present value of the lease liabilities as recorded on our Consolidated Balance Sheets as of
October 31, 2021, are as follows:
(in millions)
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Thereafter
Total lease payments
Less: imputed interest
Operating
Lease Liabilities
Finance
Lease Liabilities
Total
$
37.2 $
32.1
27.2
21.1
18.7
31.6
168.0
19.6
1.7 $
0.9
—
—
—
—
2.6
0.2
Present value of lease liabilities
$
148.4 $
2.4 $
38.9
33.0
27.2
21.1
18.7
31.6
170.6
19.8
150.8
Future sublease rental income was excluded for the periods shown above as the amounts are immaterial.
We have entered into operating lease arrangements as of October 31, 2021, that are effective for future
periods. The total amount of ROU assets and lease liabilities related to these arrangements is immaterial.
The following table includes the weighted-average remaining lease terms, in years, and the weighted-
average discount rate used to calculate the present value of operating lease liabilities:
Weighted-average remaining lease term (years)
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases
Year Ended
October 31, 2021
Year Ended
October 31, 2020
5.7
1.5
4.11 %
4.78 %
6.1
2.0
4.14 %
4.55 %
70
The following table includes supplemental cash and non-cash information related to operating leases:
(in millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Lease assets obtained in exchange for new operating lease liabilities(1)
Year Ended
October 31, 2021
Year Ended
October 31, 2020
$
38.9 $
0.5
2.8
20.6
44.8
0.5
3.4
15.7
(1) Excludes the amount initially capitalized in 2020 in conjunction with the adoption of Topic 842.
6. NET INCOME PER COMMON SHARE
Basic and Diluted Net Income Per Common Share Calculations
(in millions, except per share amounts)
Income from continuing operations
Income (loss) from discontinued operations, net of taxes
Net income
Weighted-average common and common equivalent
shares outstanding — Basic
Effect of dilutive securities
RSUs
Stock options
Performance shares
Weighted-average common and common equivalent
shares outstanding — Diluted
Net income per common share — Basic
Income from continuing operations
Income from discontinued operations
Net income
Net income per common share — Diluted
Income from continuing operations
Income from discontinued operations
Net income
$
$
$
$
$
$
Years Ended October 31,
2020
2019
2021
126.3 $
—
126.3 $
0.2 $
0.1
0.3 $
127.5
(0.1)
127.4
67.4
0.3
—
0.2
68.0
1.87 $
—
1.87 $
1.86 $
—
1.86 $
66.9
0.1
0.1
0.1
67.3
0.00 $
—
0.00 $
0.00 $
—
0.00 $
66.6
0.2
0.1
0.1
66.9
1.92
—
1.91
1.91
—
1.90
Anti-Dilutive Outstanding Stock Awards Issued Under Share-Based Compensation Plans
(in millions)
Anti-dilutive
Years Ended October 31,
2020
2019
2021
—
0.4
0.3
71
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair Value Hierarchy of Our Financial Instruments
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
(in millions)
Cash and cash equivalents(1)
Insurance deposits(2)
Assets held in funded deferred compensation plan(3)
Credit facility(4)
Interest rate swap liabilities(5)
Fair Value
Hierarchy
1
1
1
2
2
As of October 31,
2021
2020
$
62.8 $
394.2
0.7
4.9
888.8
4.6
0.7
2.6
725.3
15.5
(1) Cash and cash equivalents are stated at nominal value, which equals fair value.
(2) Represents restricted deposits that are used to collateralize our insurance obligations and are stated at nominal value, which
equals fair value. These insurance deposits are included in “Other noncurrent assets” on the accompanying Consolidated
Balance Sheets. See Note 10, “Insurance,” for further information.
(3) Represents investments held in Rabbi trusts associated with two of our deferred compensation plans, which we include in
“Other noncurrent assets” on the accompanying Consolidated Balance Sheets. The fair value of the assets held in the funded
deferred compensation plan is based on quoted market prices. See Note 12, “Employee Benefit Plans,” for further
information.
(4) Represents gross outstanding borrowings under our syndicated line of credit and term loan. Due to variable interest rates, the
carrying value of outstanding borrowings under our line of credit and term loan approximates the fair value. See Note 11,
“Credit Facility,” for further information.
(5) Represents interest rate swap derivatives designated as cash flow hedges. The fair values of the interest rate swaps are
estimated based on the present value of the difference between expected cash flows calculated at the contracted interest
rates and the expected cash flows at current market interest rates using observable benchmarks for the London Interbank
Offered Rate (“LIBOR”) forward rates at the end of the period. At October 31, 2021 and 2020, our interest rate swaps are
included in “Other accrued liabilities” and “Other noncurrent liabilities,” respectively, on the accompanying Consolidated
Balance Sheets. See Note 11, “Credit Facility,” for further information.
At October 31, 2021 and 2020, the Company had no financial assets or liabilities recorded at fair value
using Level 3 inputs, and there were no transfers to or from Level 3 financial assets or liabilities during 2021 and
one such transfer during 2020.
Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis
In addition to assets and liabilities that are measured at fair value on a recurring basis, we are also required
to measure certain items at fair value on a non-recurring basis. These assets can include: goodwill; intangible
assets; property, plant and equipment; lease-related ROU assets; and long-lived assets that have been reduced to
fair value when they are held for sale. If certain triggering events occur or if an annual impairment test is required,
we would evaluate these non-financial assets for impairment. If an impairment were to occur, the asset would be
recorded at the estimated fair value, using primarily unobservable Level 3 inputs.
During the third quarter of 2021, we recognized a non-cash impairment charge totaling $9.1 million in our
Corporate segment for previously capitalized internal-use software related to our Enterprise Resource Planning
(“ERP”) system implementation. The Company determined that certain components that were previously developed
would no longer be implemented. The impairment charge reduced the carrying value to zero for those components
and is recorded in “Selling, general and administrative expenses” on our Consolidated Statements of
Comprehensive Income (Loss) for the year ended October 31, 2021.
During the second quarter of 2020, given the general deterioration in economic and market conditions
arising from the Pandemic, we identified a triggering event indicating possible impairment of goodwill and intangible
assets, and we recorded impairment charges on goodwill and customer relationships. The fair value of these items
was determined based on unobservable Level 3 inputs. The fair value of goodwill was determined using a weighting
of fair values derived from an income approach and a market approach. The fair value of customer relationships
72
was determined based on discounted cash flows associated with the customer relationships that include significant
management assumptions, including expected proceeds. See Note 9, “Goodwill and Other Intangible Assets,” for
further information.
8. PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment
(in millions)
Machinery and other equipment
Computer equipment and software
Transportation equipment
Leasehold improvements
Furniture and fixtures
Buildings
Land
Less: Accumulated depreciation(1)
Total
As of October 31,
2021
2020
$
$
148.9 $
97.2
57.9
59.6
14.6
7.7
0.7
386.6
274.7
111.9 $
(1) For 2021, 2020, and 2019, depreciation expense was $45.0 million, $48.0 million, and $48.9 million, respectively.
Finance Leases Included in Property, Plant and Equipment
(in millions)
Transportation equipment
Furniture and fixtures
Less: Accumulated depreciation
Total
As of October 31,
2021
2020
$
$
19.8 $
0.2
20.0
16.3
3.7 $
137.0
101.2
57.7
57.1
13.7
7.6
0.7
375.0
241.3
133.7
19.4
0.2
19.7
13.6
6.1
73
9. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
(in millions)
Business &
Industry
Technology &
Manufacturing Education Aviation
Technical
Solutions
Total
Balance at October 31, 2019
$
573.9 $
407.2 $
558.6 $ 125.0 $
170.7 $ 1,835.4
Foreign currency translation
Impairment(1)
Balance at October 31, 2020
Acquisition(2)
Foreign currency translation
0.1
—
—
—
—
—
(0.3)
(0.2)
(99.3)
(55.5)
(9.0)
(163.8)
$
574.0 $
407.2 $
459.3 $
69.5 $
161.5 $ 1,671.4
554.0
1.8
—
—
—
—
—
0.4
—
1.2
554.0
3.4
Balance at October 31, 2021
$
1,129.8 $
407.2 $
459.3 $
69.9 $
162.7 $ 2,228.9
(1) The impairment charge is included in “Impairment loss” on our Consolidated Statements of Comprehensive Income (Loss) for
the year ended October 31, 2020, and is not tax deductible.
(2) During 2021, goodwill increased as a result of the Able Acquisition. See Note 4, “Acquisitions,” for additional information.
During the second quarter of 2020, we recognized a non-cash impairment charge totaling $163.8 million in
three goodwill reporting units ($99.3 million related to Education, $55.5 million related to Aviation, and $9.0 million
related to our U.K. Technical Solutions business) as part of an interim impairment test performed as a result of a
triggering event arising from the Pandemic. The fair values of the goodwill reporting units were determined using a
combination of the market approach and income approach. The market approach estimates the fair value of a
reporting unit by using market comparables for reasonably similar public companies and a control premium. The
income approach estimates fair value of a reporting unit by using discounted cash flows that include significant
management assumptions, such as revenue growth rates, operating margins, weighted average cost of capital, and
future economic and operating conditions. We did not record goodwill impairment charges during fiscal year 2021.
Other Intangible Assets
(in millions)
Customer contracts and relationships(1)(2) $
Trademarks and trade names(2)
Contract rights and other
Total(3)
$
October 31, 2021
October 31, 2020
Accumulated
Amortization
Total
Gross
Carrying
Amount
Accumulated
Amortization
Total
Gross
Carrying
Amount
793.8 $
(378.5) $
415.3 $
573.1 $
(333.6) $
239.6
19.8
0.5
(10.4)
(0.4)
9.5
0.1
9.8
0.5
(9.8)
(0.4)
—
0.1
814.1 $
(389.3) $
424.8 $
583.5 $
(343.8) $
239.7
(1) Reflects a net impairment charge of $9.0 million recorded in 2020 as a result of the triggering event described above. We
recognized net impairment charges of $5.6 million related to Aviation (consisting of a $13.8 million reduction in the gross
carrying amount of the underlying customer relationships less $8.2 million of accumulated amortization) and $3.4 million
related to our U.K. Technical Solutions business (consisting of an $8.7 million reduction in the gross carrying amount of the
underlying customer relationships less $5.3 million of accumulated amortization). These impairment charges are included in
“Impairment loss” on our Consolidated Statements of Comprehensive Income (Loss) for the year ended October 31, 2020. We
did not record impairment charges on other intangible assets during fiscal year 2021.
(2) Reflects additions from the Able Acquisition in 2021. See Note 4, “Acquisitions,” for additional information.
(3) These intangible assets are being amortized over the expected period of benefit, with a weighted average life of approximately
12 years.
Estimated Annual Amortization Expense for Each of the Next Five Years
(in millions)
Estimated amortization expense(1)
2022
2023
2024
2025
2026
$
69.1 $
62.3 $
51.7 $
45.7 $
40.2
(1) These amounts could vary as acquisitions of additional intangible assets occur in the future and as purchase price allocations
are finalized for existing acquisitions.
74
The estimates of future cash flows used in determining the fair value of goodwill and other intangible assets
involve significant management judgment and are based upon assumptions about expected future operating
performance, economic conditions, market conditions, and cost of capital. Inherent in estimating the future cash
flows are uncertainties beyond our control, such as changes in capital markets. The actual cash flows could differ
materially from management’s estimates due to changes in business conditions, operating performance, and
economic conditions.
10. INSURANCE
We use a combination of insured and self-insurance programs to cover workers’ compensation, general
liability, automobile liability, property damage, and other insurable risks. For the majority of these insurance
programs, we retain the initial $1.0 million to $1.5 million of exposure on a per-occurrence basis, either through
deductibles or self-insured retentions. Beyond the retained exposures, we have varying primary policy limits ranging
between $1.0 million and $5.0 million per occurrence. To cover general liability and automobile liability losses above
these primary limits, we maintain commercial umbrella insurance policies that provide aggregate limits of $200.0
million. Our insurance policies generally cover workers’ compensation losses to the full extent of statutory
requirements. Additionally, to cover property damage risks above our retained limits, we maintain policies that
provide per occurrence limits of $75.0 million. We are also self-insured for certain employee medical and dental
plans. We maintain stop-loss insurance for our self-insured medical plan under which we retain up to $0.5 million of
exposure on a per-participant, per-year basis with respect to claims.
We maintain our reserves for workers’ compensation, general liability, automobile liability, and property
damage insurance claims based upon known trends and events and the actuarial estimates of required reserves
considering the most recently completed actuarial reports. We use all available information to develop our best
estimate of insurance claims reserves as information is obtained. The results of actuarial reviews are used to
estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for
prior years.
Insurance Reserve Adjustments
Actuarial Reviews and Updates Performed During 2021
We review our self-insurance liabilities on a quarterly basis and adjust our accruals accordingly. Actual
claims activity or development may vary from our assumptions and estimates, which may result in material losses or
gains. As we obtain additional information that affects the assumptions and estimates used in our reserve liability
calculations, we adjust our self-insurance rates and reserves for future periods and, if appropriate, adjust our
reserves for claims incurred in prior accounting periods.
During the first and third quarters of 2021, we performed comprehensive actuarial reviews of the majority of
our casualty insurance programs to evaluate changes made to claims reserves and claims payment activity for the
periods of May 1, 2020, through October 31, 2020, and November 1, 2020, through April 30, 2021, respectively (the
“Actuarial Reviews”). The Actuarial Reviews were comprehensive in nature and were based on loss development
patterns, trend assumptions, and underlying expected loss costs during the periods analyzed.
During the second and fourth quarters of 2021, we performed interim actuarial updates of the majority of our
casualty insurance programs that considered changes in claims development and claims payment activity for the
respective periods analyzed (the “Interim Updates”). These Interim Updates were abbreviated in nature based on
actual versus expected development during the periods analyzed and relied on the key assumptions in the Actuarial
Reviews (most notably loss development patterns, trend assumptions, and underlying expected loss costs).
Based on the results of the Actuarial Reviews and Interim Updates, we decreased our total reserves related
to prior years for known claims as well as our estimate of the loss amounts associated with IBNR claims during
2021 by $36.0 million. In 2020, we decreased our total reserves related to prior year claims by $30.2 million.
75
Insurance-Related Balances and Activity
(in millions)
October 31, 2021 October 31, 2020
Insurance claim reserves, excluding medical and dental
$
574.8 $
Medical and dental claim reserves
Insurance recoverables
9.9
66.5
504.9
16.6
70.1
At October 31, 2021 and 2020, insurance recoverables are included in both “Other current assets” and
“Other noncurrent assets” on the accompanying Consolidated Balance Sheets.
Casualty Program Insurance Reserves Rollforward
(in millions)
Net balance at beginning of year
Change in case reserves plus IBNR Claims — current year
Change in case reserves plus IBNR Claims — prior years
Claims paid
Acquisition(1)
Net balance, October 31(2)
Recoverables
Gross balance, October 31
Years Ended October 31,
2020
2019
2021
$
434.8 $
443.3 $
117.9
(36.0)
(99.8)
91.6
508.3
66.5
128.5
(30.2)
(106.8)
0.2
434.8
70.1
$
574.8 $
504.9 $
427.7
137.9
(3.4)
(119.1)
—
443.3
64.5
507.8
(1) During 2021, insurance reserves increased as a result of the Able Acquisition. See Note 4, “Acquisitions,” for additional
information.
(2) Includes reserves related to discontinued operations of approximately $0.3 million for 2021, $0.5 million for 2020, and $1.0
million for 2019.
Instruments Used to Collateralize Our Insurance Obligations
(in millions)
Standby letters of credit
Surety bonds
Restricted insurance deposits
Total
11. CREDIT FACILITY
As of October 31,
2021
2020
$
$
157.9 $
83.8
0.7
242.3 $
143.6
82.6
0.7
226.9
On September 1, 2017, we refinanced and replaced our then-existing $800.0 million credit facility with a
new senior, secured five-year syndicated credit facility, consisting of a $900.0 million revolving line of credit and an
$800.0 million amortizing term loan, both of which are scheduled to mature on September 1, 2022. In accordance
with the terms of the Credit Facility, the revolving line of credit was reduced to $800.0 million on September 1, 2018.
In late March 2020, we borrowed approximately $300 million as a precautionary measure to provide increased
liquidity and preserve financial flexibility in response to uncertainty resulting from the Pandemic. This represented all
remaining amounts then available under the revolving line of credit. During the quarter ended July 31, 2020, the
Company repaid substantially all of these amounts borrowed under the revolving line of credit without penalty.
On May 28, 2020, we amended our Credit Facility with the First Amendment to further enhance our financial
flexibility as a precautionary measure in response to uncertainty arising from the Pandemic. The First Amendment
modified the financial covenants under the Credit Facility, including: (i) replacing a maximum total leverage ratio with
a maximum total net leverage ratio that varies on a quarterly basis and adjusted to 6.50 to 1.00 by the quarter
ending October 31, 2020, and back to 4.00 to 1.00 by the quarter ending October 31, 2022; (ii) modifying the
minimum fixed charge coverage ratio on a quarterly basis, which adjusts to 1.25 to 1.00 as of the quarter ending
76
April 30, 2022; and (iii) adding a minimum liquidity (defined in the Amendment as domestic cash plus available
revolving loans) of $250.0 million. These financial covenants were effective with the quarter ended April 30, 2020.
The First Amendment changed the interest rate, interest margins, and commitment fees applicable to loans
and commitments under the Credit Facility. It also added a new anti-cash hoarding mandatory prepayment that
required us to repay outstanding revolving loans or swingline loans if at any time we have in excess of $250 million
of cash and cash equivalents on our balance sheet. The First Amendment made certain additional changes to the
negative covenants restrictions under the Credit Facility, including, subject to certain exceptions, restrictions on our
ability to make acquisitions, share repurchases, and other defined restricted payments, depending on our total net
leverage ratio.
Prior to the First Amendment, borrowings under the Credit Facility bore interest at a rate equal to one-month
LIBOR plus a spread that was based upon our leverage ratio. The spread ranged from 1.00% to 2.25% for
Eurocurrency loans and 0.00% to 1.25% for base rate loans. We were also charged a commitment fee, which was
paid quarterly in arrears and was based on our leverage ratio, that ranged from 0.200% to 0.350% on the average
daily unused portion of the revolving line of credit. For purposes of this calculation, irrevocable standby letters of
credit, which are issued primarily in conjunction with our insurance programs, and cash borrowings were included
as outstanding under the line of credit.
Subsequent to the First Amendment, borrowings under the Credit Facility bore interest at a rate equal to
one-month LIBOR plus a spread that is based upon our total leverage ratio. The spread ranged from 1.00% to
2.75% for revolving Eurocurrency loans and 0.00% to 1.75% for revolving base rate loans. We were also charged a
commitment fee, which was paid quarterly in arrears and was based on our total leverage ratio, that ranges from
0.200% to 0.450% on the average daily unused portion of the revolving line of credit.
On June 28, 2021, the Company amended and restated the Credit Facility with the Second Amendment,
extending the maturity date to June 28, 2026, and increasing the capacity of the revolving credit facility from
$800.0 million to $1.3 billion and the-then remaining term loan outstanding from $620.0 million to $650.0 million.
The Second Amendment also removed the anti-cash hoarding mandatory prepayment requirement under the First
Amendment as well as other restrictions that limited our ability to make acquisitions, share repurchases, and other
defined restricted payments. Additionally, the Second Amendment modified certain financial covenants, terms,
interest rates, interest margins, and commitment fees applicable to loans and commitments under the prior Credit
Facility. The Amended Credit Facility provides for the issuance of up to $350.0 million for standby letters of credit
and the issuance of up to $75.0 million in swingline advances. The obligations under the Amended Credit Facility
are secured on a first-priority basis by a lien on substantially all of our assets and properties, subject to certain
exceptions. Additionally, we may repay amounts borrowed under the Amended Credit Facility at any time without
penalty.
Under the Amended Credit Facility, the term loan and U.S.-dollar-denominated borrowings under the
revolver bear interest at a rate equal to one-month LIBOR plus a spread based upon our leverage ratio. Euro- and
sterling-denominated borrowings under the revolver bear at a rate equal to the EURIBOR and the SONIA reference
rates, respectively, plus a spread that is based upon our leverage ratio. The spread ranges from 1.375% to 2.250%
for Eurocurrency loans and 0.375% to 1.250% for base rate loans. At October 31, 2021, the weighted average
interest rate on our outstanding borrowings was 1.59%. We also pay a commitment fee, based on our leverage ratio
and payable quarterly in arrears, ranging from 0.20% to 0.40% on the average daily unused portion of the line of
credit. For purposes of this calculation, irrevocable standby letters of credit, which are issued primarily in
conjunction with our insurance programs, and cash borrowings are included as outstanding under the line of credit.
The Amended Credit Facility contains certain covenants, including a maximum total net leverage ratio of
5.00 to 1.00, a maximum secured net leverage ratio of 4.00 to 1.00, and a minimum interest coverage ratio of 1.50
to 1.00, as well as other financial and non-financial covenants. In the event of a material acquisition, as defined in
the Amended Credit Facility, we may elect to increase the maximum total net leverage ratio to 5.50 to 1.00 for a total
of four fiscal quarters and increase the maximum secured net leverage ratio to 4.50 to 1.00 for a total of four fiscal
quarters. We did not make this election for the Able Acquisition. Our borrowing capacity is subject to, and limited by,
compliance with the covenants described above. At October 31, 2021, we were in compliance with these covenants.
The Amended Credit Facility also includes customary events of default, including: failure to pay principal,
interest, or fees when due, failure to comply with covenants; the occurrence of certain material judgments; and a
change in control of the Company. If certain events of default occur, including certain cross-defaults, insolvency,
change in control, or violation of specific covenants, then the lenders can terminate or suspend our access to the
77
Amended Credit Facility, declare all amounts outstanding (including all accrued interest and unpaid fees) to be
immediately due and payable, and require that we cash collateralize the outstanding standby letters of credit.
We incurred deferred financing costs of $6.4 million in conjunction with the Second Amendment and carried
over $6.2 million of unamortized deferred financing from the initial execution, First Amendment, and previous
amendments of the Credit Facility. Total deferred financing costs of $12.6 million, consisting of $4.9 million related to
the term loan and $7.7 million related to the revolver, are being amortized to interest expense over the term of the
Amended Credit Facility.
Credit Facility Information
(in millions)
Current portion of long-term debt
Gross term loan
Unamortized deferred financing costs
Current portion of term loan
Long-term debt
Gross term loan
Unamortized deferred financing costs
Total noncurrent portion of term loan
Revolving line of credit(1)(2)
Long-term debt
October 31, 2021 October 31, 2020
$
$
$
$
32.5 $
(1.1)
31.4 $
601.3 $
(3.5)
597.8
255.0
852.8 $
120.0
(3.3)
116.7
560.0
(2.3)
557.7
45.3
603.0
(1) Standby letters of credit amounted to $167.7 million at October 31, 2021.
(2) At October 31, 2021, we had borrowing capacity of $875.0 million.
Term Loan Maturities
During 2021, we made principal payments under the term loan of $76.3 million. As of October 31, 2021, the
following principal payments are required under the term loan.
(in millions)
Debt maturities
Interest Rate Swaps
2022
2023
2024
2025
2026
$
32.5 $
32.5 $
32.5 $
32.5 $
503.8
We enter into interest rate swaps to manage the interest rate risk associated with our floating-rate, LIBOR-
based borrowings. Under these arrangements, we typically pay a fixed interest rate in exchange for LIBOR-based
variable interest throughout the life of the agreement. We initially report the mark-to-market gain or loss on a
derivative as a component of AOCL and subsequently reclassify the gain or loss into earnings when the hedged
transactions occur and affect earnings. Interest payables and receivables under the swap agreements are accrued
and recorded as adjustments to interest expense. All of our interest rate swaps have been designated and
accounted for as cash flow hedges from inception. See Note 7, “Fair Value of Financial Instruments,” regarding the
valuation of our interest rate swaps.
Notional Amount
Fixed Interest Rate
Effective Date
$ 130.0 million
$ 130.0 million
2.86%
2.84%
November 1, 2018
November 1, 2018
Maturity Date
April 30, 2022
September 1, 2022
At October 31, 2021 and 2020, amounts recorded in AOCL for interest rate swaps were a loss of $0.2
million, net of taxes of $0.3 million, and a loss of $3.3 million, net of taxes of $0.9 million, respectively. These
amounts included the gain associated with the interest rate swaps we terminated in 2018, which is being amortized
to interest expense as interest payments are made over the original term of our Credit Facility. During 2021, we
amortized $4.7 million, net of taxes of $1.7 million, of that gain and we amortized $4.9 million, net of taxes of $1.8
million, during 2020. At October 31, 2021, the total amount expected to be reclassified from AOCL to earnings
during the next 12 months was $0.1 million, net of a taxes of $0.1 million.
78
12. EMPLOYEE BENEFIT PLANS
Defined Benefit Plans
We provide benefits to certain employees under various defined benefit and postretirement benefit plans
(collectively, the “Plans”). The Plans were previously amended to preclude new participants. All but one of the Plans
are unfunded.
Information for the Plans
As of October 31,
(in millions)
Net obligations
Projected benefit obligations(1)
Fair value of assets
(1) At October 31, 2021, total projected benefit obligations related to unfunded plans was $8.2 million. At October 31, 2020, all
plans were either unfunded or underfunded.
15.9
8.4
7.5 $
$
9.6
17.0
7.4
2021
2020
At October 31, 2021, assets of the Plans were invested 30% in equities and 70% in fixed income. The
expected return on assets was $0.3 million in 2021 and $0.4 million in 2020 and 2019. The aggregate net periodic
benefit cost for all Plans was $0.3 million, $0.2 million, and $0.6 million for 2021, 2020, and 2019, respectively.
Future benefit payments in the aggregate are expected to be $13.5 million.
Deferred Compensation Plans
We maintain deferred compensation plans that permit eligible employees and directors to defer a portion of
their compensation. At October 31, 2021 and 2020, the total liability of all deferred compensation was $32.1 million
(including $18.0 million assumed from the Able Acquisition) and $13.6 million, respectively, and these amounts are
included in “Other accrued liabilities” and “Other noncurrent liabilities” on the accompanying Consolidated Balance
Sheets. Under one of our deferred compensation plans, a Rabbi trust was created to fund the obligations, and we
are required to contribute a portion of the deferred compensation contributions for eligible participants. The assets
held in the Rabbi trust are not available for general corporate purposes. At October 31, 2021 and 2020, the fair
value of these assets was $4.9 million and $2.6 million, respectively, and these amounts are included in “Other
noncurrent assets” on the accompanying Consolidated Balance Sheets. Aggregate expense recognized under
these deferred compensation plans was $0.2 million, $0.2 million, and $0.3 million for 2021, 2020, and 2019,
respectively.
Defined Contribution Plans
We sponsor four defined contribution plans covering certain employees that are subject to the applicable
provisions of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code (“IRC”). Certain
plans permit a company match of a portion of the participant’s contributions or a discretionary contribution after the
participant has met the eligibility requirements set forth in the plan. During 2021, 2020, and 2019, we made
matching contributions required by the plans of $21.6 million, $18.2 million, and $24.3 million, respectively.
79
Multiemployer Pension and Postretirement Plans
We participate in various multiemployer pension plans under union and industry-wide agreements that
provide defined pension benefits to employees covered by collective bargaining agreements. Because of the nature
of multiemployer plans, there are risks associated with participation in these plans that differ from single-employer
plans. Assets contributed by an employer to a multiemployer plan are not segregated into a separate account and
are not restricted to provide benefits only to employees of that contributing employer. In the event another
participating employer in a multiemployer plan no longer contributes to the plan, the unfunded obligations of the plan
may be borne by the remaining participating employers, including us. In the event of the termination of a
multiemployer pension plan or a withdrawal from a multiemployer pension plan, we could incur material liabilities
under applicable law.
Expiration
Dates of
Collective
Bargaining
Agreements
10/15/2023 –
12/31/2023
7/31/2022 –
10/31/2023
8/31/2023 –
10/31/2024
12/31/2022
Key Information for Individually Significant Multiemployer Defined Benefit Pension Plans(1)
($ in millions)
Pension Protection Act
Zone Status(3)
Pension Fund
EIN/PN(2)
2021
2020
FIP/RP
Status(4)
Pending/
Implemented
Contributions by ABM
2021
2020
2019
Surcharge
Imposed(5)
Building Service 32BJ Pension
Fund
13-1879376 /
001
Red
6/30/2020
Red
6/30/2019
Implemented
$ 18.8 $ 16.8 $ 19.3
No
S.E.I.U. National Industry
Pension Fund
52-6148540 /
001
Red
12/31/2020
Red
12/31/2019
Implemented
10.9
11.1
10.6
Yes
IUOE Stationary Engineers
Local 39 Pension Plan
94-6118939 /
001
Green
12/31/2020
Green
12/31/2019
Central Pension Fund of the
IUOE & Participating
Employers
36-6052390 /
001
Green
1/31/2021
Green
1/31/2020
SEIU Local 1 & Participating
Employers Pension Trust
36-6486542 /
001
Green
9/30/2020
Green
9/30/2019
Western Conference of
Teamsters Pension Plan
91-6145047 /
001
Green
12/31/2020
Green
12/31/2019
N/A*
N/A*
N/A*
N/A*
All Other Plans:
Total Contributions(6)
*Not applicable
6.6
4.3
4.6
N/A*
5.3
7.1
11.7
N/A*
3.9
4.3
5.1
N/A*
4/7/2024
2.0
2.5
3.1
N/A*
12/31/2021 –
11/30/2022
9.3
9.5
12.2
$ 56.8 $ 55.5 $ 66.6
(1) To determine individually significant plans, we evaluated several factors, including our total contributions to the plan, our
significance to the plan in terms of participating employees and contributions, and the funded status of the plan.
(2) The “EIN/PN” column provides the Employer Identification Number and the three-digit plan number assigned to the plan by the
IRS.
(3) The Pension Protection Act Zone Status columns provide the two most recently available Pension Protection Act zone statuses
from each plan. The zone status is based on information provided to us and other participating employers and is certified by
each plan’s actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone
are less than 80% funded, and plans in the green zone are at least 80% funded.
(4) Indicates whether a Financial Improvement Plan (“FIP”) for yellow zone plans or a Rehabilitation Plan (“RP”) for red zone plans
is pending or implemented.
(5) Indicates whether our contribution in 2021 included an amount as imposed by a plan in the red zone in addition to the
contribution rate specified in the applicable collective bargaining agreement.
(6) The total contributions for fiscal year 2021 includes $4.6 million contributed by Able since the acquisition.
80
Multiemployer Pension Plans for which ABM is a Significant Contributor
Pension Fund
Arizona Sheet Metal Pension Trust Fund*
Building Service 32BJ Pension Fund
Building Service Pension Plan*
Contributions to the plan exceeded more than 5% of total
contributions per most currently available Forms 5500
(as of the plan’s year end)
6/30/2020, 6/30/2019 and 6/30/2018
6/30/2020, 6/30/2019, and 6/30/2018
4/30/2020, 4/30/2019, and 4/30/2018
Contract Cleaners Service Employees’ Pension Plan*
12/31/20, 12/31/2019, and 12/31/2018
Firemen & Oilers Pension Plan of SEIU Local 1*
IUOE Stationary Engineers Local 39 Pension Trust Fund
Massachusetts Service Employees Pension Plan*
SEIU Local 1 & Participating Employers Pension Trust
S.E.I.U. National Industry Pension Fund
7/31/2020, 7/31/2019, and 7/31/2018
12/31/2020, 12/13/2019, and 12/31/2018
12/31/2020, 12/31/2019, and 12/31/2018
9/30/2020, 9/30/2019, and 9/30/2018
12/31/2020, 12/31/2019, and 12/31/2018
Service Employees International Union Local 1 Cleveland Pension Plan*
12/31/2020, 12/31/2019, and 12/31/2018
Service Employees International Union Local 32BJ, District 36 Building
Operators Pension Trust Fund*
Teamsters Local 617 Pension Fund*
Teamsters Local Union No. 727 Pension Plan*
12/31/2020, 12/31/2019, and 12/31/2018
2/28/2021, 2/29/2020, and 2/28/2019
2/28/2021, 2/29/2020, and 2/28/2019
* These plans are not separately listed in our multiemployer table as they represent an insignificant portion of our total multiemployer pension plan contributions.
Multiemployer Defined Contribution Plans
In addition to contributions noted above, we also make contributions to multiemployer defined contribution
plans. During 2021, 2020, and 2019, our contributions to the defined contribution plans were $21.2 million, $15.5
million, and $9.0 million, respectively.
Other Multiemployer Benefit Plans
We also contribute to several multiemployer postretirement health and welfare plans based on obligations
arising under collective bargaining agreements covering union-represented employees. These plans may provide
medical, pharmacy, dental, vision, mental health, and other benefits to employees as determined by the trustees of
each plan. The majority of our contributions benefit active employees and, as such, may not constitute contributions
to a postretirement benefit plan. However, since we are unable to separate contribution amounts to postretirement
benefit plans from contribution amounts paid to benefit active employees, we categorize all such amounts as
contributions to postretirement benefit plans. During 2021, 2020, and 2019, our contributions to such plans were
$270.8 million, $264.8 million, and $269.8 million, respectively. There have been no significant changes that affect
the comparability of total contributions for any of the periods presented.
81
13. COMMITMENTS AND CONTINGENCIES
Letters of Credit and Surety Bonds
We use letters of credit and surety bonds to secure certain commitments related to insurance programs and
for other purposes. As of October 31, 2021, these letters of credit and surety bonds totaled $167.7 million and
$687.3 million, respectively.
Guarantees
In some instances, we offer clients guaranteed energy savings under certain energy savings contracts. At
October 31, 2021 and 2020, total guarantees were $254.3 million and $182.8 million, respectively, and these
guarantees extend through 2041 and 2039, respectively. We accrue for the estimated cost of guarantees when it is
probable that a liability has been incurred and the amount can be reasonably estimated. Historically, we have not
incurred any material losses in connection with these guarantees.
Indemnifications
We are party to a variety of agreements under which we may be obligated to indemnify the other party for
certain matters. These agreements are primarily standard indemnification arrangements entered into in our ordinary
course of business. Pursuant to these arrangements, we may agree to indemnify, hold harmless, and reimburse the
indemnified parties for losses suffered or incurred by the indemnified party, generally our clients, in connection with
any claims arising out of the services that we provide. We also incur costs to defend lawsuits or settle claims related
to these indemnification arrangements, and in most cases these costs are paid from our insurance program.
Although we attempt to place limits on such indemnification arrangements related to the size of the contract, the
maximum obligation may not be explicitly stated and, as a result, we are unable to determine the maximum potential
amount of future payments we could be required to make under these arrangements.
Our certificate of incorporation and bylaws may require us to indemnify our directors and officers for certain
liabilities that were incurred as a result of their status or service to ABM as a director or officer. The amount of these
obligations cannot be reasonably estimated.
Unclaimed Property Audits
We routinely remit escheat payments to states in compliance with applicable escheat laws, and we are
subject to unclaimed property audits by states in the ordinary course of business. The property subject to review in
the audit process may include unclaimed wages, vendor payments, or customer refunds. State escheat laws
generally require entities to report and remit abandoned or unclaimed property to the state, and failure to do so can
result in assessments that could include interest and penalties in addition to the payment of the escheat liability.
Legal Matters
We are a party to a number of lawsuits, claims, and proceedings incident to the operation of our business,
including those pertaining to labor and employment, contracts, personal injury, and other matters, some of which
allege substantial monetary damages. Some of these actions may be brought as class actions on behalf of a class
or purported class of employees.
At October 31, 2021, the total amount accrued for probable litigation losses where a reasonable estimate of
the loss could be made was $18.5 million. We do not accrue for contingent losses that, in our judgment, are
considered to be reasonably possible but not probable. The estimation of reasonably possible losses also requires
the analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties.
Our management currently estimates the range of loss for reasonably possible losses for which a reasonable
estimate of the loss can be made is between zero and $6 million. Factors underlying this estimated range of loss
may change from time to time, and actual results may vary significantly from this estimate. The amounts above do
not include any accrual or loss estimates with respect to the Bucio case described below.
Litigation outcomes are difficult to predict and the estimation of probable losses requires the analysis of
multiple possible outcomes that often depend on judgments about potential actions by third parties. If one or more
matters are resolved in a particular period in an amount in excess of, or in a manner different than, what we
anticipated, this could have a material adverse effect on our financial position, results of operations, or cash flows.
82
In some cases, although a loss is probable or reasonably possible, we cannot reasonably estimate the
maximum potential losses for probable matters or the range of losses for reasonably possible matters. Therefore,
our accrual for probable losses and our estimated range of loss for reasonably possible losses do not represent our
maximum possible exposure.
Certain Legal Proceedings
In determining whether to include any particular lawsuit or other proceeding in our disclosure below, we
consider both quantitative and qualitative factors. These factors include, but are not limited to: the amount of
damages and the nature of any other relief sought in the proceeding; if such damages and other relief are specified,
our view of the merits of the claims; whether the action is or purports to be a class action, and our view of the
likelihood that a class will be certified by the court; the jurisdiction in which the proceeding is pending; and the
potential impact of the proceeding on our reputation.
The Consolidated Cases of Bucio and Martinez v. ABM Janitorial Services filed on April 7, 2006, pending in
the Superior Court of California, County of San Francisco (the “Bucio case”)
The Bucio case is a class action pending in San Francisco Superior Court that alleges we failed to provide
legally required meal periods and make additional premium payments for such meal periods, pay split shift
premiums when owed, and reimburse janitors for travel expenses. There is also a claim for penalties under the
California Labor Code Private Attorneys General Act (“PAGA”). On April 19, 2011, the trial court held a hearing on
plaintiffs’ motion to certify the class. At the conclusion of that hearing, the trial court denied plaintiffs’ motion to certify
the class. On May 11, 2011, the plaintiffs filed a motion to reconsider, which was denied. The plaintiffs appealed the
class certification issues. The trial court stayed the underlying lawsuit pending the decision in the appeal. The Court
of Appeal of the State of California, First Appellate District (the “Court of Appeal”), heard oral arguments on
November 7, 2017. On December 11, 2017, the Court of Appeal reversed the trial court’s order denying class
certification and remanded the matter for certification of a meal period, travel expense reimbursement, and split shift
class. The case was remitted to the trial court for further proceedings on class certification, discovery, dispositive
motions, and trial.
On September 20, 2018, the trial court entered an order defining four certified subclasses of janitors who
were employed by the legacy ABM janitorial companies in California at any time between April 7, 2002, and April 30,
2013, on claims based on alleged previous automatic deduction practices for meal breaks, unpaid meal premiums,
unpaid split shift premiums, and unreimbursed business expenses, such as mileage reimbursement for use of
personal vehicles to travel between worksites. On February 1, 2019, the trial court held that the discovery related to
PAGA claims allegedly arising after April 30, 2013, would be stayed until after the class and PAGA claims accruing
prior to April 30, 2013, had been tried. The parties engaged in mediation in July 2019, which did not result in
settlement of the case. On October 17, 2019, the plaintiffs filed a motion asking the trial court to certify additional
classes based on an alleged failure to maintain time records, an alleged failure to provide accurate wage
statements, and an alleged practice of combining meal and rest breaks. The trial court denied the plaintiffs’ motion
to certify additional classes on December 26, 2019. The case was reassigned to a new judge on January 6, 2020.
ABM filed motions for summary adjudication as to certain of plaintiffs’ class claims, and the trial court denied those
motions in November 2020. The parties engaged in another mediation in January 2021, which did not result in a
settlement of the case. Plaintiffs filed motions for summary adjudication and/or summary judgment on some claims
in December 2020.
In February and March 2021, the parties engaged in expert discovery that provided detailed information
regarding the plaintiffs’ damage calculations on the class claims. On February 25, 2021, the California Supreme
Court issued an opinion in Donohue v. AMN Services, which addresses the standard for adjudicating meal period
claims under California law and we believe is supportive of ABM’s legal position in the Bucio case. On May 5, 2021,
the trial court denied all of the plaintiffs’ December 2020 motions for summary adjudication and/or summary
judgment, and the case was assigned to a new judge. On May 5, 2021, the trial court ordered the parties to attend a
mandatory settlement conference before a separate judge on June 11, 2021. The trial date was scheduled for July
12, 2021.
On July 7, 2021, the Company entered into a class action settlement and release agreement to settle the
Bucio case for $140 million and to obtain a release of the certified class claims that were asserted in the Bucio case.
The settlement will also resolve the PAGA claim. The release of the certified class claims covers the time period
from April 7, 2002, through April 30, 2013. The release of the PAGA claim covers the time period from November 15,
2005, through July 18, 2021. Any attorneys’ fees awarded by the trial court and all costs of notice and claims
83
administration will be paid from the $140 million settlement fund. Employees who will be a part of the settlement will
receive payments based on the number of pay periods they worked.
The settlement agreement is contingent upon the approval of the trial court. On August 11, 2021, the
plaintiffs filed the motion for preliminary approval of class action settlement with the trial court. On December 7,
2021, the trial court issued its order granting preliminary approval of the class action settlement. Members of the
class will receive notice of the settlement, and there will be an opportunity for them to object to the settlement before
the trial court grants final approval of the settlement. The final approval hearing with the trial court is currently
scheduled to take place on March 16, 2022. No payments will be made to employees until after the settlement is
finally approved by the trial court.
The Company has recorded a $142.9 million settlement accrual, which includes an accrual of $2.9 million of
related payroll taxes, for the Bucio case within “Other current liabilities” on the unaudited Consolidated Balance
Sheets as of October 31, 2021, and $142.9 million of related expense in “Selling, general and administrative
expenses” in our unaudited Consolidated Statements of Comprehensive Income (Loss) for the year ended October
31, 2021.
14. PREFERRED AND COMMON STOCK
Preferred Stock
We are authorized to issue 500,000 shares of preferred stock. None of these preferred shares are issued.
Common Stock
Effective December 18, 2019, our Board of Directors replaced our then-existing share repurchase program
with a new share repurchase program under which we may repurchase up to $150.0 million of our common stock.
These purchases may take place on the open market or otherwise, and all or part of the repurchases may be made
pursuant to Rule 10b5-1 plans or in privately negotiated transactions. The timing of repurchases is at our discretion
and will depend upon several factors, including market and business conditions, future cash flows, share price,
share availability, and other factors at our discretion. Repurchased shares are retired and returned to an authorized
but unissued status. The repurchase program may be suspended or discontinued at any time without prior notice.
Repurchase Activity
We repurchased shares under the 2019 Share Repurchase Program during the second quarter of 2020, as
summarized below. However, due to the market and business conditions arising from the Pandemic, in March 2020
we suspended further repurchases of our common stock. At October 31, 2021, authorization for $144.9 million of
repurchases remained under the 2019 Share Repurchase Program. There were no share repurchases during 2021.
(in millions, except per share amounts)
Total number of shares purchased
Average price paid per share
Total cash paid for share repurchases
Years Ended October 31,
2021
2020
—
N/A $
— $
0.2
36.16
5.1
$
84
15. SHARE-BASED COMPENSATION PLANS
We use various share-based compensation plans to provide incentives for our key employees and
directors. Currently, these incentives primarily consist of RSUs and performance shares.
On May 2, 2006, our stockholders approved the 2006 Equity Incentive Plan, which was last amended and
restated on March 7, 2018 (as amended and restated, the “2006 Equity Plan”). The 2006 Equity Plan is an omnibus
plan that provides for a variety of equity and equity-based award vehicles, including stock options, stock
appreciation rights, RSUs, performance shares, and other share-based awards. Shares subject to awards that
terminate without vesting or exercise are available for future awards under the 2006 Equity Plan. Certain of the
awards under the 2006 Equity Plan may qualify as “performance-based” compensation under the IRC.
On March 24, 2021, our stockholders approved the 2021 Equity and Incentive Compensation Plan (the
“2021 Equity Plan”). The 2021 Equity Plan is an omnibus plan that provides for a variety of equity and equity-based
award vehicles, including stock options, stock appreciation rights, RSUs, performance shares, and other share-
based awards. Shares subject to awards that terminate without vesting or exercise are available for future awards
under the 2021 Equity Plan. Certain of the awards under the 2021 Equity Plan may qualify as “performance-based”
compensation under the IRC.
No further shares are authorized for issuance under the 2006 Equity Plan. There are 3,975,000 total shares
of common stock authorized for issuance under the 2021 Equity Plan, and at October 31, 2021, there were
5,406,414 shares of common stock available for grant for future equity-based compensation awards. In addition,
there are certain plans under which we can no longer issue awards, such as the 2006 Equity Plan, although awards
outstanding under such plans may still vest and be exercised.
We also maintain an employee stock purchase plan, which our stockholders approved on March 9, 2004
(the “2004 Employee Stock Purchase Plan”). As amended, there are 4,000,000 total shares of common stock
authorized for issuance under the 2004 Employee Stock Purchase Plan. Effective May 1, 2006, the 2004 Employee
Stock Purchase Plan is no longer considered compensatory and the values of the awards are no longer treated as
share-based compensation expense. Additionally, as of that date, the purchase price became 95% of the fair value
of our common stock price on the last trading day of the month. Employees may designate up to 10% of their
compensation for the purchase of stock, subject to a $25,000 annual limit. Employees are required to hold their
shares for a minimum of six months from the date of purchase. At October 31, 2021, there were 518,881 remaining
unissued shares under the 2004 Employee Stock Purchase Plan.
Compensation Expense by Type of Award and Related Income Tax Benefit
(in millions)
RSUs
Performance shares
Share-based compensation expense before income taxes
Income tax benefit
Share-based compensation expense, net of taxes
$
$
Years Ended October 31,
2020
2019
2021
17.6 $
15.8
33.5
(9.4)
24.1 $
11.5 $
8.8
20.3
(5.7)
14.6 $
9.5
8.0
17.5
(4.9)
12.5
85
RSUs and Dividend Equivalent Rights
We award RSUs to eligible employees and our directors (each, a “Grantee”) that entitle the Grantee to
receive shares of our common stock as the units vest. RSUs granted to eligible employees in 2020 and 2021
generally vest ratably over three years. RSUs granted to eligible employees prior to 2020 generally vest with
respect to 50% of the underlying award on the second and fourth anniversary of the award. RSUs granted to non-
employee directors vest on the first anniversary date of the grant date. In general, the receipt of RSUs is subject to
the Grantee’s continuing employment or service as a director.
RSUs are credited with dividend equivalent rights that are converted to RSUs at the fair market value of our
common stock on the dates the dividend payments are made and are subject to the same terms and conditions as
the underlying award.
RSU Activity
Outstanding at October 31, 2020
Granted
Vested (including 0.2 shares withheld for income taxes)
Forfeited
Outstanding at October 31, 2021
Number of
Shares
(in millions)
Weighted-
Average
Grant Date
Fair Value per
Share
1.1 $
0.4
(0.5)
(0.2)
1.0 $
36.32
40.22
36.34
36.56
38.06
At October 31, 2021, total unrecognized compensation cost, net of estimated forfeitures, related to RSUs
was $21.4 million, which is expected to be recognized ratably over a weighted-average vesting period of 1.7 years.
In 2021, 2020, and 2019, the weighted-average grant date fair value per share of awards granted was $40.22,
$36.11, and $34.48, respectively. In 2021, 2020, and 2019, the total grant date fair value of RSUs vested and
converted to shares of ABM common stock was $16.9 million, $6.1 million, and $10.7 million, respectively
86
Performance Shares, Including TSR Performance Shares
Performance shares consist of a contingent right to receive shares of our common stock based on
performance targets adopted by our Compensation Committee. Performance shares are credited with dividend
equivalent rights that will be converted to performance shares at the fair market value of our common stock
beginning after the performance targets have been satisfied and are subject to the same terms and conditions as
the underlying award.
For certain performance share awards, the number of performance shares that will vest is based on pre-
established internal financial performance targets and typically a three-year service and performance period. The
number of TSR-modified awards that will vest over the respective three-year performance period is based on our
total shareholder return relative to the S&P 1500 Composite Commercial Services & Supplies Index. Vesting of 0%
to 150% of the awards originally granted may occur depending on the respective performance metrics.
Performance Share Activity
Outstanding at October 31, 2020
Granted
Vested (including 0.1 shares withheld for income taxes)
Performance adjustments
Forfeited
Outstanding at October 31, 2021
Number of
Shares
(in millions)
Weighted-
Average
Grant Date
Fair Value
per Share
0.8 $
0.3
(0.2)
0.2
(0.1)
1.0 $
37.35
39.97
36.53
37.63
39.22
38.25
At October 31, 2021, total unrecognized compensation cost related to performance share awards was
$15.4 million, which is expected to be recognized ratably over a weighted-average vesting period of 1.7 years.
Except for TSR performance shares, these costs are based on estimated achievement of performance targets and
estimated costs are periodically reevaluated. For our TSR performance shares, these costs are based on the fair
value of awards at the grant date and are recognized on a straight-line basis over the service period of three years.
In 2021, 2020, and 2019, the weighted-average grant date fair value per share of awards granted was
$39.97, $35.92, and $35.44, respectively. In 2021, 2020, and 2019, the total grant date fair value of performance
shares vested and converted to shares of ABM common stock was $9.0 million, $6.1 million, and $6.8 million,
respectively.
In 2021, 2020, and 2019, we used the Monte Carlo simulation valuation technique to estimate the fair value
of TSR performance share grants, which used the assumptions in the table below.
Monte Carlo Assumptions
Expected life(1)
Expected stock price volatility(2)
Risk-free interest rate(3)
Stock price(4)
2021
2020
2019
2.81 years
2.81 years
2.81 years
42.9 %
0.2 %
28.7 %
1.5 %
27.7 %
2.5 %
$
40.75
$
37.99
$
34.92
(1) The expected life represents the remaining performance period of the awards.
(2) The expected volatility for each grant is determined based on the historical volatility of our common stock over a period equal
to the remaining term of the performance period from the date of grant for all awards.
(3) The risk-free interest rate is based on the continuous compounded yield on U.S. Treasury Constant Maturity Rates with
varying remaining terms; the yield is determined over a time period commensurate with the performance period from the grant
date.
(4) The stock price is the closing price of our common stock on the valuation date.
87
Employee Stock Purchase Plan
(in millions, except per share amounts)
Weighted-average fair value of granted purchase rights per share
Common stock issued
Fair value of common stock issued per share
Aggregate purchases
Years Ended October 31,
2021
2020
2019
$
$
$
2.17 $
1.75 $
0.1
0.1
1.77
0.1
41.18 $
33.18 $
33.60
3.3 $
3.5 $
4.1
16. INCOME TAXES
Geographic Sources of Income from Continuing Operations Before Income Taxes
(in millions)
United States
Foreign
Income from continuing operations before income taxes
Components of Income Tax (Provision) Benefit
(in millions)
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Income tax provision
Years Ended October 31,
2020
2019
2021
152.8 $
45.2 $
27.0
8.1
179.8 $
53.3 $
137.1
23.1
160.2
Years Ended October 31,
2020
2019
2021
(66.3) $
(27.4)
(7.8)
34.9
13.2
(0.1)
(53.5) $
(59.3) $
(28.6)
(1.7)
23.2
12.5
0.9
(53.1) $
(6.4)
(10.7)
(5.9)
(8.5)
(1.6)
0.4
(32.7)
$
$
$
$
Reconciliation of the U.S. Statutory Tax Rate to Annual Effective Tax Rate
U.S. statutory rate
State and local income taxes, net of federal tax benefit
Federal and state tax credits
Impact of foreign operations
Changes in uncertain tax positions
Incremental tax benefit from share-based compensation awards
Energy efficiency incentives
Impact from goodwill impairment
Transition tax on foreign earnings
Remeasurement of U.S. deferred taxes
Nondeductible expenses
Other, net
Effective tax rate
88
Years Ended October 31,
2020
2019
2021
21.0%
6.8
(2.6)
0.3
1.5
(0.4)
(0.7)
—
—
—
2.9
1.0
29.8 %
21.0%
(0.6)
(4.7)
1.3
(2.0)
(1.6)
(3.8)
81.7
—
—
4.4
3.9
99.6 %
21.0%
5.9
(3.9)
(1.0)
(0.8)
(0.7)
—
—
(1.1)
(0.3)
2.1
(0.8)
20.4 %
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Act”) was enacted into law. Among other
provisions, it reduced the federal corporate income tax rate from 35% to 21% and required companies to pay a one-
time transition tax on the deemed repatriation of indefinitely reinvested earnings of international subsidiaries. Our
U.S. statutory federal tax rate for fiscal 2019 and future years was reduced to 21%. Other provisions under the Tax
Act became effective for us in fiscal 2019, including limitations on deductibility of interest and executive
compensation, as well as a new minimum tax on Global Intangible Low-Taxed Income (“GILTI”), which we have
elected to account for as a period cost. While U.S. federal tax expense has been recognized as a result of the Tax
Act, no deferred tax liabilities with respect to federal and state income taxes or foreign withholding taxes have been
recognized.
During 2021 and 2020, we had effective tax rates of 29.8% and 99.6%, respectively, resulting in a provision
for tax of $53.5 million and $53.1 million, respectively. Our effective tax rate for 2021 was impacted by the following
discrete items: a $3.0 million provision for nondeductible transaction costs; a $2.6 million provision for change in tax
reserves; a $1.4 million provision for true-ups; and a $1.2 million benefit for energy efficiency incentives. Our
effective tax rate for 2020 was also impacted by the following discrete items: a $5.7 million benefit from true-ups; a
$2.3 million provision related to WOTC; a $2.1 million benefit from energy efficiency incentives; and a $1.1 million
benefit from change of tax reserves. The effective tax rate for the year ended October 31, 2020, excluding a
nondeductible impairment loss of $163.8 million, was 24.4%.
In response to the Pandemic, Congress enacted the CARES Act on March 27, 2020. The CARES Act
provides various tax provisions, including payroll tax provisions, which we have evaluated for applicability. Through
December 31, 2020, we deferred approximately $132 million of payroll tax, which the CARES Act requires to be
remitted in equal parts by December 31, 2021, and December 31, 2022. The CARES Act did not have a material
impact on our income tax provision.
Components of Deferred Tax Assets and Liabilities
(in millions)
Deferred tax assets attributable to:
Self-insurance claims (net of recoverables)
Deferred and other compensation
Accounts receivable allowances
Settlement liabilities
Other accruals
Other comprehensive income
State taxes
State net operating loss carryforwards
Tax credits
Unrecognized tax benefits
Deferred payroll taxes
Operating lease liabilities
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities attributable to:
Property, plant and equipment
Goodwill and other acquired intangibles
Right-of-use assets
Tax accounting method change
Other
Total deferred tax liabilities
$
As of October 31,
2021
2020
92.0 $
34.4
8.2
44.2
6.6
1.3
0.7
4.0
2.9
3.3
35.1
33.5
266.2
(2.2)
264.0
(4.1)
(222.2)
(33.8)
(15.8)
(10.6)
(286.5)
74.7
28.6
8.8
5.0
1.5
2.7
1.4
5.9
3.7
3.2
26.9
38.2
200.6
(4.1)
196.5
(1.2)
(159.4)
(38.2)
—
(8.5)
(207.3)
Net deferred tax liabilities
$
(22.5) $
(10.8)
89
Net Operating Loss Carryforwards and Credits
State net operating loss carryforwards totaling $74.2 million at October 31, 2021, are being carried forward
in several state jurisdictions where we are permitted to use net operating losses from prior periods to reduce future
taxable income. These losses will expire between 2022 and 2041. Federal net operating loss carryforwards were
fully utilized during 2020. Federal and state tax credit carryforwards totaling $3.4 million are available to reduce
future cash taxes and will expire between 2022 and 2041.
The valuation allowance represents the amount of tax benefits related to state net operating loss
carryforwards that are not likely to be realized. We believe the remaining deferred tax assets are more likely than
not to be realizable based on estimates of future taxable income.
Changes to the Valuation Allowance
(in millions)
Valuation allowance at beginning of year
Other, net
Valuation allowance at end of year
Unrecognized Tax Benefits
Years Ended October 31,
2020
2019
2021
$
$
4.1 $
(1.9)
2.2 $
8.4 $
(4.3)
4.1 $
12.0
(3.6)
8.4
At October 31, 2021, 2020, and 2019, there were $30.4 million, $35.5 million, and $35.3 million,
respectively, of unrecognized tax benefits that if recognized in the future would impact our effective tax rate. We
estimate that a decrease in unrecognized tax benefits of up to approximately $8.3 million is reasonably possible
over the next 12 months due to lapses of applicable statutes of limitations. At October 31, 2021 and 2020, accrued
interest and penalties were $1.6 million and $1.5 million, respectively. For interest and penalties, we recognized an
expense of $0.1 million and $0.4 million in 2021 and 2020, respectively, and a benefit of $0.2 million in 2019.
Reconciliation of Total Unrecognized Tax Benefits
(in millions)
Balance at beginning of year
Additions for tax positions related to the current year
Additions for tax positions related to prior years
Reductions for tax positions related to prior years
Reductions for lapse of statute of limitations
Settlements
Balance at end of year
Jurisdictions
Years Ended October 31,
2020
2019
2021
$
$
35.5 $
3.7
0.3
(5.3)
(2.5)
(1.3)
30.4 $
35.3 $
2.1
1.6
—
(3.0)
(0.5)
35.5 $
35.8
—
3.6
—
(3.9)
(0.3)
35.3
We conduct business in all 50 states, significantly in California, Texas, and New York, as well as in various
foreign jurisdictions. Our most significant income tax jurisdiction is the United States. Due to expired statutes and
closed audits, our federal income tax returns for years prior to fiscal 2018 are no longer subject to examination by
the U.S. Internal Revenue Service. Generally, for the majority of state and foreign jurisdictions where we do
business, periods prior to fiscal 2018 are no longer subject to examination. We are currently being examined by the
IRS and tax authorities of California, New York City, and Montana.
90
17. SEGMENT AND GEOGRAPHIC INFORMATION
Segment Information
Our current reportable segments consist of B&I, T&M, Education, Aviation, and Technical Solutions, as
further described below. The newly acquired Able is integrated within our B&I reportable segment.
B&I
T&M
Education
Aviation
REPORTABLE SEGMENTS AND DESCRIPTIONS
B&I, our largest reportable segment, encompasses janitorial, facilities services,
and parking services for commercial real estate properties, sports and
entertainment venues, and traditional hospitals and non-acute healthcare
facilities. B&I also provides vehicle maintenance and other services to rental car
providers.
T&M provides janitorial, facilities services, and parking services to industrial and
high-tech manufacturing facilities.
Education delivers janitorial, custodial, landscaping and grounds, facilities
engineering, and parking services for public school districts, private schools,
colleges, and universities.
Aviation supports airlines and airports with services ranging from parking and
janitorial to passenger assistance, catering logistics, air cabin maintenance, and
transportation.
Technical Solutions
Technical Solutions specializes in mechanical and electrical services. These
services can also be leveraged for cross-selling across all of our industry
groups, both domestically and internationally.
The accounting policies for our segments are the same as those disclosed within our significant accounting
policies in Note 2, “Basis of Presentation and Significant Accounting Policies.” Our management evaluates the
performance of each reportable segment based on its respective operating profit results, which include the
allocation of certain centrally incurred costs. Corporate expenses not allocated to segments include certain CEO
and other finance and human resource departmental expenses, certain information technology costs, share-based
compensation, certain legal costs and settlements, restructuring and related costs, certain actuarial adjustments to
self-insurance reserves, and direct acquisition costs. Management does not review asset information by segment,
therefore we do not present assets in this note.
91
Financial Information by Reportable Segment
(in millions)
Revenues
Business & Industry
Technology & Manufacturing
Education
Aviation
Technical Solutions
Elimination of inter-segment revenues
Operating profit
Business & Industry
Technology & Manufacturing
Education(1)
Aviation(2)
Technical Solutions(3)
Government Services
Corporate(4)
Adjustment for income from unconsolidated affiliates, included in
Aviation
Adjustment for tax deductions for energy efficient government
buildings, included in Technical Solutions
Income from unconsolidated affiliates
Interest expense
Income from continuing operations before income taxes
Depreciation and amortization
Business & Industry
Technology & Manufacturing
Education
Aviation
Technical Solutions
Corporate
Years Ended October 31,
2020
2019
2021
3,346.5 $
987.1
836.4
668.8
534.0
(144.2)
6,228.6 $
337.8 $
103.8
60.5
32.5
49.8
(0.2)
(374.6)
3,157.8 $
956.0
808.8
680.9
506.6
(122.4)
5,987.6 $
253.7 $
84.4
(41.1)
(59.6)
9.5
(0.1)
(146.9)
3,251.4
917.0
847.4
1,017.3
593.2
(127.7)
6,498.6
182.3
72.5
39.0
21.1
55.4
(0.1)
(159.0)
(2.1)
(2.2)
(3.0)
(1.2)
206.3
2.1
(28.6)
179.8 $
20.4 $
11.3
30.6
9.1
5.9
12.7
89.9 $
(2.1)
95.7
2.2
(44.6)
53.3 $
18.9 $
12.5
33.8
10.6
7.2
13.5
96.4 $
0.1
208.3
3.0
(51.1)
160.2
21.3
14.3
37.3
11.9
8.6
13.9
107.4
$
$
$
$
$
$
(1) Reflects impairment charges totaling $99.3 million on goodwill during the year ended October 31, 2020.
(2) Reflects impairment charges totaling $61.1 million on goodwill and intangible assets during the year ended October 31, 2020.
(3) Reflects impairment charges totaling $12.4 million on goodwill and intangible assets during the year ended October 31, 2020.
(4) Reflects accrued litigation settlement reserve totaling $142.9 million for the Bucio case during the year ended October 31,
2021
Geographic Information Based on the Country in Which the Sale Originated(1)
(in millions)
Revenues
United States
All other countries
Years Ended October 31,
2020
2019
2021
$
$
5,847.8 $
380.8
6,228.6 $
5,625.1 $
362.5
5,987.6 $
6,025.2
473.3
6,498.6
(1) Substantially all of our long-lived assets are related to United States operations.
92
18. SUBSEQUENT EVENTS
Our strategic transformation under ELEVATE will result in changes to our reportable segments in fiscal year
2022. To align the Company’s operations with the new strategic initiative, the Manufacturing & Distribution (“M&D”)
industry group will be created, replacing T&M. As part of our focus to better serve our manufacturing and distribution
clients, M&D will maintain our large manufacturing clients and add clients in the distribution sector from B&I. In
addition, technology clients served by T&M will shift into B&I. This organizational structure change was effective as
of November 1, 2021. We will begin reporting our results under the new reportable segment of M&D beginning in
the first quarter of fiscal year 2022.
93
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
a. Disclosure Controls and Procedures.
As of the end of the period covered by this report, our Principal Executive Officer and Principal Financial
Officer evaluated our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e)
of the Exchange Act. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer
concluded that as of the end of the period covered by this report, our disclosure controls and procedures were
effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange
Act is (1) recorded, processed, summarized, and reported within the time periods specified in the rules and forms of
the Securities and Exchange Commission and (2) accumulated and communicated to our management, including
our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required
disclosure.
b. Management’s Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and
with the participation of our management, including our Principal Executive Officer and Principal Financial Officer,
we conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the
framework in Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal
control over financial reporting was effective as of October 31, 2021.
The Company acquired Able on September 30, 2021. Management excluded Able from its assessment of
the effectiveness of the Company’s internal control over financial reporting as of October 31, 2021. Able represented
approximately 4.4% of the Company’s total consolidated assets (excluding goodwill and intangibles, which are
included within the scope of the assessment) and 1.6% of total consolidated revenues, as of and for the year ended
October 31, 2021.
Audit Report on Internal Controls over Financial Reporting of the Registered Public Accounting Firm
KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial
statements included in this Annual Report on Form 10-K and, as part of their audit, has issued their report, included
herein, on the effectiveness of our internal control over financial reporting.
c. Changes in Internal Control Over Financial Reporting.
To support the growth of our financial shared service capabilities and standardize our financial systems, we
continue to update several key platforms, including our HR information systems, enterprise resource planning
system, and labor management system. The implementation of several key platforms involves changes in the
systems that include internal controls. Although some of the transitions have proceeded to date without material
adverse effects, the possibility exists that they could adversely affect our internal controls over financial reporting
and procedures.
There were no other changes in our internal control over financial reporting during the fiscal year 2021
identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. As a result
of the Pandemic, many of our office-based employees began working remotely in March 2020. This change to the
working environment did not have a material effect on our internal controls over financial reporting during the fiscal
year 2021. We are continually monitoring and assessing the impact of the Pandemic and the resulting changes to
our working environment on our internal controls over financial reporting.
94
ITEM 9B. OTHER INFORMATION.
Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act
Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”), effective August 10,
2012, added a new subsection (r) to Section 13 of the Exchange Act, which requires issuers that file periodic reports
with the SEC to disclose in their annual and quarterly reports whether, during the reporting period, they or any of
their “affiliates” (as defined in Rule 12b-2 under the Exchange Act) have knowingly engaged in specified activities or
transactions relating to Iran, including activities not prohibited by U.S. law and conducted outside the United States
by non-U.S. affiliates in compliance with applicable laws. Issuers must also file a notice with the SEC if any
disclosable activity under ITRA has been included in an annual or quarterly report.
The Company recently discovered that one of its U.K. subsidiaries had been providing aircraft cleaning
services to Iran Air since April 2020. The U.K. subsidiary terminated its relationship with Iran Air on August 30, 2021.
The aggregate amount of payments received by the U.K. subsidiary in return for its services was approximately
GBP 64,000, and the aggregated profits were GBP 6,400.
The Company has submitted a preliminary self-disclosure and investigation report of the U.K. subsidiary’s
transactions with the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”).
The Company intends to fully cooperate with OFAC in its review of this matter and does not currently expect
that OFAC’s review will have a material adverse effect on the Company. The Company is also in the process of
reviewing and developing enhanced controls, procedures, and other measures to ensure compliance with
applicable law.
95
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information about our executive officers is found in Part I, Item 1, of this Annual Report on Form 10-K under
“Executive Officers of Registrant.” Additional information required by this Item will be set forth under the captions
“Proposal No. 1—Election of Directors,” “Corporate Governance and Board Matters,” and “Audit-Related Matters” in
our Definitive Proxy Statement for our 2022 Annual Meeting of Stockholders (the “2022 Proxy Statement”). Such
information is incorporated herein by reference. Our 2022 Proxy Statement will be filed with the Securities and
Exchange Commission within 120 days after the conclusion of our fiscal year ended October 31, 2021.
On April 19, 2021, we filed our Annual CEO Certification as required by Section 303A.12 of the NYSE Listed
Company Manual.
Code of Business Conduct
We have adopted and posted on our website (www.abm.com) the ABM Code of Business Conduct. Our
Code of Business Conduct qualifies as a “code of ethics” within the meaning of Item 406 of Regulation S-K. Our
Code of Business Conduct applies to all of our directors, officers, and employees, including our Principal Executive
Officer, Principal Financial Officer, and Principal Accounting Officer. If any amendments are made to the Code of
Business Conduct or if any waiver, including any implicit waiver, from a provision of the Code of Business Conduct
is granted to our Principal Executive Officer, Principal Financial Officer, or Principal Accounting Officer, we will
disclose the nature of such amendment or waiver on our website at the address specified above.
ITEM 11. EXECUTIVE COMPENSATION.
Information with respect to executive compensation required by this Item will be set forth under the captions
“Director Compensation for Fiscal Year 2021,” “Executive Compensation,” and “Corporate Governance and Board
Matters—Compensation Committee Interlocks and Insider Participation” in our 2022 Proxy Statement and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
Information with respect to security ownership of certain beneficial owners and management and equity
compensation plan information and related stockholder matters required by this Item will be set forth under the
captions “General Information—Security Ownership of Certain Beneficial Owners,” “General Information—Security
Ownership of Directors and Executive Officers,” and “General Information—Equity Compensation Plan Information”
in our 2022 Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Information with respect to certain relationships and related transactions and with respect to director
independence required by this Item will be set forth under the captions “General Information—Certain Relationships
and Transactions with Related Persons” and “Corporate Governance and Board Matters” in our 2022 Proxy
Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Information with respect to our Audit Committee’s pre-approval policy for audit services and our principal
accounting fees and services required by this Item will be set forth under the caption “Audit-Related Matters” in our
2022 Proxy Statement and is incorporated herein by reference.
96
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as part of this report:
PART IV
1. Financial Statements: Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at October 31, 2021 and 2020
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended October 31, 2021, 2020,
and 2019
Consolidated Statements of Stockholders’ Equity for the Years Ended October 31, 2021, 2020, and 2019
Consolidated Statements of Cash Flows for the Years Ended October 31, 2021, 2020, and 2019
2. Financial Statement Schedule
Valuation and Qualifying Accounts for the Years Ended October 31, 2021, 2020, and 2019
3. Exhibits
Exhibit Index
45
50
51
52
53
98
99
97
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
Balance
Beginning of
Year
Additions
from Able
Acquisition
Charges to
Costs and
Expenses
Write-offs(1)/
Allowance
Taken
Balance
End of Year
(in millions)
Accounts receivable
and sales allowances
2021
2020
$
2019
(1) Write-offs are net of recoveries.
35.5
22.4
19.2
1.3
—
—
44.3
96.3
87.7
$
(48.4)
(83.2)
(84.6)
32.7
35.5
22.4
98
EXHIBIT INDEX
Exhibit
No.
1.1
2.1
2.2
3.1
3.2
4.1
10.1
10.2
10.3
10.4
Exhibit Description
Incorporated by Reference
Underwriting Agreement, dated March 14,
2018, among ABM Industries Incorporated,
Goldman Sachs & Co LLC, and UBS
Securities LLC
Agreement and Plan of Merger, dated July 11,
2017, among GCA Holding Corp., ABM
Industries Incorporated, Grade Sub One, Inc.,
Grade Sub Two, LLC and Thomas H. Lee
Equity Fund VII, L.P. and Broad Street
Principal Investments Holdings, L.P., acting
jointly as the Securityholder Representative
Purchase Agreement, dated August 25, 2021,
among Crown Building Maintenance Co.,
Crown Energy Services, Inc., ABM Industries
Incorporated and the sellers and sellers’
representative party thereto
Restated Certificate of Incorporation of ABM
Industries Incorporated, dated March 26, 2020
Form File No.
Exhibit
Filing Date
8-K
001-08929
1.1
March 19, 2018
8-K
001-08929
2.1
July 14, 2017
8-K
001-08929
2.1
August 25, 2021
8-K
001-08929
3.1
March 27, 2020
Amended and Restated Bylaws of ABM
Industries Incorporated, dated March 26, 2020
8-K
001-08929
3.2
March 27, 2020
Description of Registrant’s Securities
10-K
001-08929
4.1
December 17, 2020
8-K
001-08929
10.2
September 8, 2017
10-K
001-08929
10.3
December 22, 2017
10-Q 001-08929
10.1
September 7, 2018
10-Q 001-08929
10.2
September 7, 2018
Credit Agreement, dated as of September 1,
2017, by and among ABM Industries
Incorporated, a Delaware corporation, certain
subsidiaries of ABM Industries Incorporated
from time to time party thereto, the lenders
from time to time party thereto and Bank of
America, N.A., as administrative agent
Letter Agreement, dated November 6, 2017,
between ABM Industries Incorporated and
Bank of America, N.A., as Swingline Lender
with respect to the Credit Agreement dated as
of September 1, 2017, among ABM Industries
Incorporated, the Designated Borrowers party
thereto, the Lenders party thereto and Bank of
America, N.A., as administrative agent
First Amendment, dated as of July 3, 2018, to
the Credit Agreement dated September 1,
2017, by and among ABM Industries
Incorporated, a Delaware corporation, the
Designated Borrowers identified on the
signature pages thereto, the Guarantors
identified on the signature pages thereto, the
Lenders identified on the signature pages
thereto, and Bank of America, N.A., as
administrative agent
Second Amendment, dated as of September
5, 2018, to the Credit Agreement dated
September 1, 2017, by and among ABM
Industries Incorporated, a Delaware
corporation, the Designated Borrowers
identified on the signature pages thereto, the
Guarantors identified on the signature pages
thereto, the Lenders identified on the
signature pages thereto, and Bank of
America, N.A., as administrative agent
99
10.5
10.6
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*
10-Q 001-08929
10.1
June 18, 2020
10-Q 001-08929
10.1
September 9, 2021
10-K
001-08929
10.17
January 14, 2005
10-Q 001-08929
10.1
September 8, 2006
10-K
001-08929
10.7
December 23, 2010
10-K
001-08929
8-K
001-08929
10.9
10.1
December 21, 2018
March 8, 2018
8-K
001-08929
10.1
March 26, 2021
10-Q 001-08929
10.2
June 3, 2015
10-Q 001-08929
10.1
March 5, 2020
10-K
001-08929
10.16
December 17, 2020
10-K
001-08929
10.17
December 17, 2020
10-Q 001-08929
10.1
June 9, 2021
Third Amendment, dated as of May 28, 2020,
to the Credit Agreement dated September 1,
2017, by and among ABM Industries
Incorporated, a Delaware corporation, the
Designated Borrowers identified on the
signature pages thereto, the Guarantors
identified on the signature pages thereto, the
Lenders identified on the signatures pages
thereto and Bank of America, N.A., as
administrative agent
Fourth Amendment, dated as of June 28,
2021, to the Credit Agreement dated
September 1, 2017, by and among ABM
Industries Incorporated, a Delaware
corporation, the Designated Borrowers
identified on the signature pages thereto, the
Guarantors identified on the signature pages
thereto, the Lenders identified on the
signature pages thereto and Bank of America,
N.A., as administrative agent
ABM Executive Retiree Healthcare and Dental
Plan
Director Retirement Plan Distribution Election
Form, as revised June 16, 2006
Deferred Compensation Plan for Non-
Employee Directors, as amended and
restated December 13, 2010
Form of Director’s Indemnification Agreement
2006 Equity Incentive Plan, as amended and
restated March 7, 2018
ABM Industries Incorporated 2021 Equity and
Incentive Compensation Plan
Statement of Terms and Conditions Applicable
to Options, Restricted Stock and Restricted
Stock Units, and Performance Shares
Granted to Employees Pursuant to the 2006
Equity Incentive Plan, for Awards Granted on
or after March 4, 2015
Statement of Terms and Conditions Applicable
to Options, Restricted Stock and Restricted
Stock Units, and Performance Shares
Granted to Employees Pursuant to the 2006
Equity Incentive Plan, for Awards Granted on
or after January 1, 2020
Statement of Terms and Conditions Applicable
to Options, Restricted Stock, Restricted Stock
Units, and Performance Shares Granted to
Employees Pursuant to the 2006 Equity
Incentive Plan, for Awards Granted on July 14,
2020
Statement of Terms and Conditions Applicable
to Options, Restricted Stock, Restricted Stock
Units and Performance Shares Granted to
Employees Pursuant to the 2006 Equity
Incentive Plan, for Awards Granted with a
Two-Year Vesting Schedule
Statement of Terms and Conditions Applicable
to Awards Granted to Employees Pursuant to
the 2021 Equity and Incentive Compensation
Plan
100
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
10.28*
10.29*
10.30*
10.31*
10.32*
10.33*
10.34*
10.35*
10.36*
Statement of Terms and Conditions Applicable
to Options, Restricted Stock, and Restricted
Stock Units Granted to Directors Pursuant to
the 2006 Equity Incentive Plan, for Awards
Granted on or after March 4, 2015
Statement of Terms and Conditions Applicable
to Options, Restricted Stock, and Restricted
Stock Units Granted to Directors Pursuant to
the 2006 Equity Incentive Plan, for Awards
Granted on or after January 1, 2020
Statement of Terms and Conditions Applicable
to Awards Granted to Non-Employee Directors
Pursuant to the 2021 Equity and Incentive
Compensation Plan
Form of Restricted Stock Unit Agreement -
2006 Equity Plan
Form of Performance Share Agreement -
2006 Equity Plan
Executive Stock Option Plan (aka Age-Vested
Career Stock Option Plan), as amended and
restated June 4, 2012
Deferred Compensation Plan for Executives,
amended and restated October 25, 2010
Supplemental Executive Retirement Plan, as
amended and restated June 3, 2008
Service Award Benefit Plan, as amended and
restated June 3, 2008
Executive Severance Pay Policy, as amended
and restated March 7, 2011
Amended and Restated Executive
Employment Agreement, dated as of
September 22, 2017, by and between ABM
Industries Incorporated and Scott Salmirs
Amended and Restated Change in Control
Agreement, dated as of September 22, 2017,
by and between ABM Industries Incorporated
and Scott Salmirs
Executive Employment Agreement, dated as
of November 1, 2017, by and between ABM
Industries Incorporated and Scott Giacobbe
Change in Control Agreement, dated as of
November 1, 2017, by and between ABM
Industries Incorporated and Scott Giacobbe
Amendment to Executive Employment
Agreement, dated as of November 1, 2017, by
and between ABM Industries Incorporated
and Scott Giacobbe
Release Agreement, dated as of May 27,
2021, by and between ABM Industries
Incorporated and Scott Giacobbe
Executive Employment Agreement, dated as
of January 1, 2018, by and between ABM
Industries Incorporated and Rene Jacobsen
Change in Control Agreement, dated as of
January 1, 2018, by and between ABM
Industries Incorporated and Rene Jacobsen
Executive Employment Agreement, dated as
of March 1, 2018, by and between ABM
Industries Incorporated and Andrea Newborn
101
10-Q 001-08929
10.3
June 3, 2015
10-Q 001-08929
10.2
March 5, 2020
10-Q 008-08929
10.2
June 9, 2021
10-K
001-08929
10.18
December 20, 2019
10-K
001-08929
10.19
December 20, 2019
10-Q 001-08929
10.1
September 6, 2012
10-K
001-08929
10.22
December 23, 2010
10-Q 001-08929
10.4
September 8, 2008
10-Q 001-08929
10.5
September 8, 2008
10-Q 001-08929
10.1
March 10, 2011
10-K
001-08929
10.28
December 22, 2017
10-K
001-08929
10.29
December 22, 2017
10-Q 001-08929
10.1
March 7, 2018
10-Q 001-08929
10.2
March 7, 2018
10-Q 001-08929
10.5
June 9, 2021
10-Q 001-08929
10.8
June 9, 2021
10-Q 001-08929
10.3
March 7, 2018
10-Q 001-08929
10.4
March 7, 2018
10-Q 001-08929
10.1
March 7, 2019
10-Q 001-08929
10.2
March 7, 2019
10-K
001-08929
10.35
December 20, 2019
10-Q 001-08929
10.4
June 9, 2021
10-Q 001-08929
10.6
June 9, 2021
10-Q 001-08929
10.7
June 9, 2021
10-Q 001-08929
10.3
June 9, 2021
10.37*
10.38*
10.39*
10.40*
10.41*
10.42*
21.1‡
23.1‡
31.1‡
31.2‡
32.1†
101.INS ‡
101.SCH ‡
101.CAL‡
101.LAB ‡
101.PRE ‡
101.DEF ‡
104†
Change in Control Agreement, dated as of
March 1, 2018, by and between ABM
Industries Incorporated and Andrea Newborn
Executive Employment Agreement, dated as
of October 28, 2019, by and between ABM
Industries Incorporated and Joshua H.
Feinberg
Change in Control Agreement, dated as of
February 8, 2020, by and between ABM
Industries Incorporated and Joshua H.
Feinberg
Executive Employment Agreement, dated as
of November 1, 2020, by and between ABM
Industries Incorporated and Earl R. Ellis
Change in Control Agreement, dated as of
November 30, 2020, by and between ABM
Industries Incorporated and Earl R. Ellis
Change in Control Agreement, dated as of
April 1, 2011, by and between ABM Industries
Incorporated and Dean A. Chin
Subsidiaries of the Registrant
Consent of Independent Registered Public
Accounting Firm
Certification of Chief Executive Officer
pursuant to Securities Exchange Act of 1934
Rule 13a-14(a) or 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer
pursuant to Securities Exchange Act of 1934
Rule 13a-14(a) or 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certifications pursuant to Securities Exchange
Act of 1934 Rule 13a-14(b) or 15d-14(b) and
18 U.S.C. Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of
2002
Inline XBRL Instance Document (the instance
document does not appear in the Interactive
Data File because its XBRL tags are
embedded within the Inline XBRL document)
Inline XBRL Taxonomy Extension Schema
Document
Inline XBRL Taxonomy Calculation Linkbase
Document
Inline XBRL Taxonomy Label Linkbase
Document
Inline XBRL Presentation Linkbase Document
Inline XBRL Taxonomy Extension Definition
Linkbase Document
Cover Page Interactive Data File (formatted
as Inline XBRL and contained in Exhibit 101)
*
‡
†
Indicates management contract or compensatory plan, contract, or arrangement
Indicates filed herewith
Indicates furnished herewith
102
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
ABM Industries Incorporated
By:
/s/ Scott Salmirs
Scott Salmirs
President and Chief Executive Officer and Director
December 22, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of ABM Industries and in the capacities and on the dates indicated.
By:
/s/ Scott Salmirs
Scott Salmirs
President and Chief Executive Officer and Director
(Principal Executive Officer)
December 22, 2021
/s/ Earl R. Ellis
Earl R. Ellis
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
December 22, 2021
/s/ Sudhakar Kesavan
Sudhakar Kesavan
Chairman of the Board and Director
December 22, 2021
/s/ LeighAnne G. Baker
LeighAnne G. Baker, Director
December 22, 2021
/s/ Donald F. Colleran
Donald F. Colleran, Director
December 22, 2021
/s/ Thomas M. Gartland
Thomas M. Gartland, Director
December 22, 2021
/s/ Winifred M. Webb
Winifred M. Webb, Director
December 22, 2021
/s/ Dean A. Chin
Dean A. Chin
Senior Vice President, Chief Accounting Officer,
Corporate Controller and Treasurer
(Principal Accounting Officer)
December 22, 2021
/s/ Quincy L. Allen
Quincy L. Allen, Director
December 22, 2021
/s/ Linda Chavez
Linda Chavez, Director
December 22, 2021
/s/ Art A. Garcia
Art A. Garcia, Director
December 22, 2021
/s/ Jill M. Golder
Jill M. Golder, Director
December 22, 2021
103
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ABM Industries Incorporated and Subsidiaries
Reconciliation of Non-GAAP Financial Measures (Unaudited)
($ millions)
Reconciliation of Income from Continuing Operations to
Adjusted Income from Continuing Operations
Income from continuing operations
Items impacting comparability*
Income tax benefit
Items impacting comparability, net of taxes
Adjusted income from continuing operations
Reconciliation of Net Income to Adjusted EBITDA
Net income
Items impacting comparability*
Income tax provision
Interest expense
Depreciation and amortization
Adjusted EBITDA
Reconciliation of Adjusted EBITDA Margin
Revenues
Adjusted EBITDA
Adjusted EBITDA margin
Years ended October 31,
2020
2021
$
$
126.3
156.7
(39.7)
117.0
243.3
126.3
156.7
53.5
28.6
89.9
455.0
0.2
167.6
(4.3)
163.3
163.5
0.3
167.6
53.1
44.6
96.4
361.9
$
6,228.6
455.0
7.3%
5,987.6
361.9
6.0%
$
$
$
* The Company adjusts income from continuing operations to exclude the impact of certain items that are
unusual, non-recurring, or otherwise do not reflect management’s views of the underlying operational results
and trends of the Company. Please refer to the Company’s Fourth Quarter and Full Year 2021 Financial
Results press release for a full list of Items Impacting Comparability.
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
Sudhakar Kesavan [ C ]
Non-Executive Chairman of the Board, ABM Industries Incorporated
Former Chairman and Chief Executive Officer, ICF International
Quincy L. Allen [ B ]
Former Chief Marketing Officer of IBM Cloud, IBM Corporation
LeighAnne G. Baker [ A, D ]
Former Senior Vice President and Chief Human Resources Officer,
Cargill, Inc.
Linda Chavez [ A, C ]
Senior Fellow, Niskanen Center
Donald F. Colleran [ A, D ]
President and Chief Executive Officer, FedEx Express
Art A. Garcia [ B, D ]
Former Executive Vice President and Chief Financial Officer,
Ryder System, Inc.
Thomas M. Gartland [ A, C ]
Executive Chairman, SGL TransGroup; Former President,
North America, Avis Budget Group, Inc.
Jill M. Golder [ B, C ]
Former Senior Vice President and Chief Financial Officer,
Cracker Barrel Old Country Store, Inc.
President and Chief Executive Officer, ABM Industries Incorporated
Wendy M. Webb [ B, D ]
Founder, Kestrel Corporate Advisors
Forward-Looking Statements
This 2021 ABM Annual Report contains both historical and forward-looking statements. Forward-looking
statements are not based on historical facts but instead reflect our current expectations, estimates or
projections concerning future results or events. These statements generally can be identified by the use
of forward-looking words or phrases such as “believe,” “expect,” “anticipate,” “may,” “could,” “intend,”
“forecast,” “outlook,” or other similar words or phrases. These statements are not guarantees of future
performance and are inherently subject to known and unknown risks, uncertainties and assumptions that
are difficult to predict and could cause our actual results to differ materially from those indicated by
those statements. Forward-looking statements in this 2021 ABM Annual Report include, but are not
limited to, statements regarding our future financial and operating performance and strategic initiatives.
These statements involve a number of risks and uncertainties that could cause actual results to differ
materially from those contemplated by the relevant forward-looking statement, including but not limited
to the risks and uncertainties contained in the Company’s Annual Report on Form 10-K for the year ended
October 31, 2021, which is included in this 2021 ABM Annual Report. The Company urges readers to
consider these risks and uncertainties in evaluating its forward-looking statements. The Company
cautions readers not to place undue reliance upon any such forward-looking statements, which speak
only as of the date made. The Company disclaims any obligation or undertaking to publicly release any
updates or revisions to any forward-looking statements contained herein (or elsewhere) to reflect any
change in the Company’s expectations with regard thereto, or any change in events, conditions or
circumstances on which any such statement is made, whether as a result of new information, future
events or otherwise, except as otherwise required by the federal securities laws.
President and Chief Executive Officer
Rene Jacobsen
Executive Vice President, Chief Operating Officer
Earl Ellis
Executive Vice President, Chief Financial Officer
Josh Feinberg
Executive Vice President, Chief Strategy and
Transformation Officer
Sean Mahoney
Executive Vice President, President of Sales and Marketing
Andrea Newborn
Executive Vice President, General Counsel, and
Corporate Secretary
Raul Valentin
Executive Vice President, Chief Human Resources Officer
Dean A. Chin
Senior Vice President, Chief Accounting Officer,
Corporate Controller and Treasurer
ADDITIONAL COMPANY INFORMATION
Listing
New York Stock Exchange
Ticker Symbol
ABM
Registrar and Transfer Agent
Computershare
Web Address: computershare.com/investor
Contact: www-us.computershare.com/investor/contact
Auditors
Additional copies available to stockholders at no charge upon request to:
ABM Investor Relations
Annual Meeting
Dividends
The Company has paid quarterly cash dividends on its Common Stock
payment of cash dividends on a quarterly basis, subject to the Company’s
earnings, financial condition and other factors.
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ABM Corporate Headquarters
ABM.com
All rights reserved.
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