NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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
The accompanying unaudited consolidated financial statements have been prepared in accordance with (i) United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and (ii) the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of our management, our unaudited consolidated financial statements and accompanying notes (the “Financial Statements”) include all normal recurring adjustments that are necessary for the fair statement of the interim periods presented. Interim results of operations are not necessarily indicative of results for the full year. The Financial Statements should be read in conjunction with our audited consolidated financial statements (and notes thereto) in our Annual Report on Form 10-K for the year ended October 31, 2020. Unless otherwise indicated, all references to years are to our fiscal years, which end on October 31.
Impact of the Pandemic
COVID-19 has resulted in a worldwide health Pandemic. To date, the Pandemic has surfaced in regions all around the world and resulted in business slowdowns and shutdowns, as well as global travel restrictions. In these Financial Statements, we have assessed the current impact of the Pandemic on our financial condition, results of operations, and cash flows as well as on our estimates, forecasts, and accounting policies. We have made additional disclosures of these assessments, as necessary. Given the unprecedented nature of this situation, we cannot reasonably estimate the full impact the Pandemic will have on our financial condition, results of operations, or cash flows in the foreseeable future. The ultimate impact of the Pandemic on our company is highly uncertain and will depend on future developments, and such impacts could exist for an extended period of time, even after the Pandemic subsides.
The Pandemic continues to create a dynamic client environment, and we are working diligently to ensure our clients’ changing staffing and service needs are met while actively managing direct labor and related personnel costs, including furloughs or reduced hours for certain frontline employees in markets significantly impacted by business slowdowns and shutdowns.
Rounding
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.
Discontinued Operations
Following the sale of our Security business in 2015, we record all costs associated with this former business in discontinued operations. Such costs generally relate to litigation we retained and insurance reserves.
Management Reimbursement Revenue by Segment
We operate certain parking facilities under management reimbursement arrangements. Under these arrangements, we manage the parking facilities for management fees and pass through the revenues and expenses associated with the facilities to the owners. These revenues and expenses are reported in equal amounts as costs reimbursed from our managed locations:
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|
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|
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Three Months Ended July 31,
|
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Nine Months Ended July 31,
|
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(in millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Business & Industry
|
$
|
47.5
|
|
|
$
|
42.6
|
|
|
$
|
134.1
|
|
|
$
|
178.0
|
|
|
Aviation
|
13.4
|
|
|
14.8
|
|
|
39.9
|
|
|
61.4
|
|
|
Total
|
$
|
60.9
|
|
|
$
|
57.4
|
|
|
$
|
174.1
|
|
|
$
|
239.3
|
|
Recently Adopted Accounting Standards
The Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) in June 2016 and subsequently issued these amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-11, and ASU 2020-03 (collectively, “Topic 326”). Topic 326 replaces the existing incurred loss impairment model with a methodology that incorporates all expected credit loss estimates, resulting in more timely recognition of losses. Under Topic 326, an organization is required to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported financial assets. It also requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses. We adopted this standard effective November 1, 2020, on a modified retrospective basis. The asset and liability classes that we have identified to be in the scope of Topic 326 at the time of the adoption are trade accounts receivable, costs incurred in excess of amounts billed, guarantees, reinsurance recoverables, and notes receivable. The adoption of this standard did not have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This accounting update aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance also specifies that the presentation of capitalized implementation costs and the related amortization on the balance sheet, income statement, and statement of cash flows should align with the presentation of the hosting (service) element of the arrangement. 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.
3. REVENUES
Disaggregation of Revenues
We generate revenues under several types of contracts, which are further explained below. 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 Business & Industry (“B&I”), Technology & Manufacturing (“T&M”), Education, Aviation, and Technical Solutions, as described in Note 10, “Segment Information.”
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|
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
|
|
|
|
|
|
|
Three Months Ended July 31, 2021
|
|
Nine Months Ended July 31, 2021
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|
(in millions)
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|
B&I
|
|
T&M
|
|
Education
|
|
Aviation
|
|
Technical
Solutions
|
|
Total
|
|
B&I
|
|
T&M
|
|
Education
|
|
Aviation
|
|
Technical
Solutions
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Service Line
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janitorial(1)
|
|
$
|
650.4
|
|
|
$
|
197.6
|
|
|
$
|
181.6
|
|
|
$
|
28.7
|
|
|
$
|
—
|
|
|
$
|
1,058.3
|
|
|
$
|
1,941.7
|
|
|
$
|
591.8
|
|
|
$
|
553.4
|
|
|
$
|
86.9
|
|
|
$
|
—
|
|
|
$
|
3,173.8
|
|
|
Parking(2)
|
|
76.4
|
|
|
9.2
|
|
|
0.2
|
|
|
66.9
|
|
|
—
|
|
|
152.8
|
|
|
213.7
|
|
|
30.9
|
|
|
0.6
|
|
|
184.2
|
|
|
—
|
|
|
429.5
|
|
|
Facility Services(3)
|
|
80.8
|
|
|
39.3
|
|
|
26.7
|
|
|
7.5
|
|
|
—
|
|
|
154.2
|
|
|
257.5
|
|
|
118.9
|
|
|
78.1
|
|
|
21.2
|
|
|
—
|
|
|
475.7
|
|
|
Building & Energy Solutions(4)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
146.1
|
|
|
146.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
385.0
|
|
|
385.0
|
|
|
Airline Services(5)
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
72.6
|
|
|
—
|
|
|
72.7
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
174.8
|
|
|
—
|
|
|
175.1
|
|
|
|
|
$
|
807.7
|
|
|
$
|
246.1
|
|
|
$
|
208.4
|
|
|
$
|
175.7
|
|
|
$
|
146.1
|
|
|
$
|
1,584.1
|
|
|
$
|
2,413.3
|
|
|
$
|
741.6
|
|
|
$
|
632.0
|
|
|
$
|
467.2
|
|
|
$
|
385.0
|
|
|
$
|
4,639.1
|
|
|
Elimination of inter-segment revenues
|
|
|
|
|
|
|
|
|
|
|
|
(40.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
(106.1)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,543.1
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,533.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31, 2020
|
|
Nine Months Ended July 31, 2020
|
|
(in millions)
|
|
B&I
|
|
T&M
|
|
Education
|
|
Aviation
|
|
Technical
Solutions
|
|
Total
|
|
B&I
|
|
T&M
|
|
Education
|
|
Aviation
|
|
Technical
Solutions
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Service Line
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janitorial(1)
|
|
$
|
596.9
|
|
|
$
|
197.1
|
|
|
$
|
165.7
|
|
|
$
|
26.9
|
|
|
$
|
—
|
|
|
$
|
986.6
|
|
|
$
|
1,786.9
|
|
|
$
|
573.1
|
|
|
$
|
529.4
|
|
|
$
|
91.2
|
|
|
$
|
—
|
|
|
$
|
2,980.5
|
|
|
Parking(2)
|
|
67.7
|
|
|
8.5
|
|
|
0.2
|
|
|
46.9
|
|
|
—
|
|
|
123.3
|
|
|
290.7
|
|
|
24.0
|
|
|
1.5
|
|
|
203.1
|
|
|
—
|
|
|
519.4
|
|
|
Facility Services(3)
|
|
92.2
|
|
|
37.6
|
|
|
22.7
|
|
|
6.3
|
|
|
—
|
|
|
158.8
|
|
|
285.5
|
|
|
113.7
|
|
|
65.7
|
|
|
24.8
|
|
|
—
|
|
|
489.7
|
|
|
Building & Energy Solutions(4)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
119.2
|
|
|
119.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
383.5
|
|
|
383.5
|
|
|
Airline Services(5)
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
36.2
|
|
|
—
|
|
|
36.3
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
220.7
|
|
|
—
|
|
|
221.0
|
|
|
|
|
$
|
756.9
|
|
|
$
|
243.2
|
|
|
$
|
188.6
|
|
|
$
|
116.4
|
|
|
$
|
119.2
|
|
|
$
|
1,424.2
|
|
|
$
|
2,363.4
|
|
|
$
|
710.8
|
|
|
$
|
596.6
|
|
|
$
|
539.9
|
|
|
$
|
383.5
|
|
|
$
|
4,594.1
|
|
|
Elimination of inter-segment revenues
|
|
|
|
|
|
|
|
|
|
|
|
(30.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
(91.1)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,394.1
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,503.0
|
|
(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 ASU
2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services; 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, and other general maintenance and repair services for clients in the public and private sectors and are generally structured as Energy Savings, Fixed-Price Repair, and Refurbishment contracts. We also franchise certain operations under franchise agreements relating to our Linc Network and TEGG brands, pursuant to franchise contracts.
(5) Airline Services arrangements support airlines and airports with services such as passenger assistance, catering logistics, and airplane cabin maintenance. These arrangements are often structured as monthly fixed-price, cost-plus, transaction price, and hourly contracts.
Contract Types
We have arrangements under various contract types, as described in Note 2, “Basis of Presentation and Significant Accounting Policies,” in our Annual Report on Form 10-K for the year ended October 31, 2020.
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 as they are earned.
The majority of our contracts include performance obligations that are primarily satisfied over time as we provide the related services. These contract types include: monthly fixed-price; square-foot; cost-plus; work orders; transaction-price; hourly; management reimbursement; leased location; allowance; energy savings contracts; and fixed-price repair and refurbishment contracts, as well as our franchise and royalty fee arrangements. We recognize revenue as the services are performed using a measure of progress that is determined by the contract type. Generally, most of our contracts are cancelable by either party without a substantive penalty, and the majority have a notification period of 30 to 60 days.
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.
Remaining Performance Obligations
At July 31, 2021, performance obligations that were unsatisfied or partially unsatisfied for which we expect to recognize revenue totaled $284.7 million. We expect to recognize revenue on approximately 74% 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 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.
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. Commissions expense is recognized on a straight-line basis over a weighted average expected customer relationship period.
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.
The following tables present the balances in our contract assets and contract liabilities:
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|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
July 31, 2021
|
|
October 31, 2020
|
|
Contract assets
|
|
|
|
|
|
Billed trade receivables(1)
|
|
$
|
826.7
|
|
|
$
|
835.8
|
|
|
Unbilled trade receivables(1)
|
|
115.3
|
|
|
53.9
|
|
|
Costs incurred in excess of amounts billed(2)
|
|
43.0
|
|
|
52.2
|
|
|
Capitalized commissions(3)
|
|
26.9
|
|
|
25.2
|
|
(1) Included in trade accounts receivable, net, on the unaudited 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 unaudited Consolidated Balance Sheets. During the nine months ended July 31, 2021, we capitalized $11.9 million of new costs and amortized $10.2 million of previously capitalized costs. There was no impairment loss recorded on the costs capitalized.
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Nine Months Ended
July 31, 2021
|
|
Contract liabilities(1)
|
|
|
|
Balance at beginning of period
|
|
$
|
36.4
|
|
|
Additional contract liabilities
|
|
134.1
|
|
|
Recognition of deferred revenue
|
|
(114.9)
|
|
|
Balance at end of period
|
|
$
|
55.6
|
|
(1) Included in other accrued liabilities on the unaudited Consolidated Balance Sheets.
4. NET INCOME (LOSS) PER COMMON SHARE
Basic and Diluted Net Income (Loss) Per Common Share Calculations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Nine Months Ended July 31,
|
|
(in millions, except per share amounts)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
(Loss) income from continuing operations
|
$
|
(13.7)
|
|
|
$
|
56.0
|
|
|
$
|
92.0
|
|
|
$
|
(52.9)
|
|
|
Income from discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
Net (loss) income
|
$
|
(13.7)
|
|
|
$
|
56.0
|
|
|
$
|
92.0
|
|
|
$
|
(52.8)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common and common
equivalent shares outstanding — Basic
|
67.5
|
|
|
66.9
|
|
|
67.3
|
|
|
66.9
|
|
|
Effect of dilutive securities(1)
|
|
|
|
|
|
|
|
|
Restricted stock units
|
—
|
|
|
0.1
|
|
|
0.4
|
|
|
—
|
|
|
Stock options
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
Performance shares
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
—
|
|
|
Weighted-average common and common
equivalent shares outstanding — Diluted
|
67.5
|
|
|
67.2
|
|
|
67.8
|
|
|
66.9
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share — Basic
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
$
|
(0.20)
|
|
|
$
|
0.84
|
|
|
$
|
1.37
|
|
|
$
|
(0.79)
|
|
|
Income from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net (loss) income
|
$
|
(0.20)
|
|
|
$
|
0.84
|
|
|
$
|
1.37
|
|
|
$
|
(0.79)
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share — Diluted
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
$
|
(0.20)
|
|
|
$
|
0.83
|
|
|
$
|
1.36
|
|
|
$
|
(0.79)
|
|
|
Income from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net (loss) income
|
$
|
(0.20)
|
|
|
$
|
0.83
|
|
|
$
|
1.36
|
|
|
$
|
(0.79)
|
|
(1) Excludes the impact of potentially dilutive outstanding share-based securities that are excluded from the calculation of diluted loss per share in periods when we have a loss, as their inclusion would have an anti-dilutive effect. Such impact is included in the table below.
Anti-Dilutive Outstanding Stock Awards Issued Under Share-Based Compensation Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 31,
|
|
Nine Months Ended July 31,
|
|
(in millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Anti-dilutive
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.6
|
|
5. 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)
|
Fair Value Hierarchy
|
|
July 31, 2021
|
|
October 31, 2020
|
|
Cash and cash equivalents(1)
|
1
|
|
$
|
505.4
|
|
|
$
|
394.2
|
|
|
Insurance deposits(2)
|
1
|
|
0.7
|
|
|
0.7
|
|
|
Assets held in funded deferred compensation plan(3)
|
1
|
|
2.8
|
|
|
2.6
|
|
|
Credit facility(4)
|
2
|
|
660.0
|
|
|
725.3
|
|
|
Interest rate swap liabilities(5)
|
2
|
|
7.2
|
|
|
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 unaudited Consolidated Balance Sheets. See Note 6, “Insurance,” for further information.
(3) Represents investments held in a Rabbi trust associated with one of our deferred compensation plans, which we include in “Other noncurrent assets” on the accompanying unaudited Consolidated Balance Sheets. The fair value of the assets held in the funded deferred compensation plan is based on quoted market prices.
(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 7, “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 July 31, 2021, and October 31, 2020, our interest rate swaps are included in “Other noncurrent liabilities” on the accompanying unaudited Consolidated Balance Sheets. See Note 7, “Credit Facility,” for further information.
The Company does not currently have any 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 the nine months ended July 31, 2021.
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, then we would evaluate these non-financial assets for impairment. If an impairment were to occur, then the asset would be recorded at the estimated fair value, using primarily unobservable Level 3 inputs.
During the three and nine months ended July 31, 2021, we identified and recognized an impairment of certain previously capitalized internal-use software, as further described below. During the second quarter of 2020, given the general deterioration in economic and market conditions arising from the Pandemic, we identified a triggering event and recognized impairment of goodwill and intangible assets, as further described below.
Internal-Use Software
During the three and nine months ended July 31, 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 integrated into the new ERP system. The impairment charge reduced the carrying value to zero for those components and is recorded in “Selling, general and administrative
expenses” on our unaudited Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended July 31, 2021.
Goodwill
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 included significant management assumptions, such as revenue growth rates, operating margins, weighted average cost of capital, and future economic and operating conditions. The impairment charge is included in “Impairment loss” on our unaudited Consolidated Statements of Comprehensive Income (Loss) for the nine months ended July 31, 2020, and is not tax deductible.
Intangible Assets
During the second quarter of 2020 and in connection with the goodwill triggering event previously mentioned, 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). The fair value of customer contracts and relationships was determined based on discounted cash flows associated with the customer relationships that included significant management assumptions, including expected proceeds. These impairment charges are included in “Impairment loss” on our unaudited Consolidated Statements of Comprehensive Income (Loss) for the nine months ended July 31, 2020.
6. 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.
Actuarial Review Performed During Third Quarter 2021
We review our self-insurance liabilities on a regular 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 third quarter of 2021, we performed a comprehensive actuarial review of the majority of our casualty insurance programs to evaluate changes made to claims reserves and claims payment activity for the period of November 1, 2020, through April 30, 2021 (the “Actuarial Review”). The Actuarial Review was comprehensive in nature and was based on loss development patterns, trend assumptions, and underlying expected loss costs during the period analyzed.
Based on the results of the Actuarial Review, we decreased our total reserves related to prior years for known claims as well as our estimate of the loss amounts associated with incurred but not reported claims (“IBNR claims”) during the nine months ended July 31, 2021 by $29.7 million. During the nine months ended July 31, 2020, we decreased our total reserves related to prior year claims by $15.1 million. We will continue to assess ongoing developments, which may result in further adjustments to reserves.
During the fourth quarter of 2021, we expect to perform an update to our Actuarial Review for our significant insurance programs that will use the most recent claims data and consider changes in claims development and claims payment activity for the periods analyzed. This review will be abbreviated in nature based on actual versus expected development during the periods analyzed, will rely on the key assumptions used in the Actuarial Review (most notably loss development patterns, trend assumptions, and underlying expected loss costs), and will include claims related to certain previously acquired businesses. This review may lead to further adjustments to our insurance reserves.
Insurance Related Balances and Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
July 31, 2021
|
|
October 31, 2020
|
|
Insurance claim reserves, excluding medical and dental
|
$
|
488.8
|
|
|
$
|
504.9
|
|
|
Medical and dental claim reserves
|
10.5
|
|
|
16.6
|
|
|
Insurance recoverables
|
67.4
|
|
|
70.1
|
|
At July 31, 2021, and October 31, 2020, insurance recoverables are included in both “Other current assets” and “Other noncurrent assets” on the accompanying unaudited Consolidated Balance Sheets.
Instruments Used to Collateralize Our Insurance Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
July 31, 2021
|
|
October 31, 2020
|
|
Standby letters of credit
|
$
|
139.0
|
|
|
$
|
143.6
|
|
|
Surety bonds
|
83.8
|
|
|
82.6
|
|
|
Restricted insurance deposits
|
0.7
|
|
|
0.7
|
|
|
Total
|
$
|
223.5
|
|
|
$
|
226.9
|
|
7. 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 (the “revolver”) and an $800.0 million amortizing term loan, both of which were scheduled to mature on September 1, 2022. In accordance with terms of the Credit Facility, the revolver was reduced to $800.0 million on September 1, 2018.
On June 28, 2021, the Company amended and restated the Credit Facility (the “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 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. The Amendment also 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 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 July 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. Our borrowing capacity is subject to, and limited by, compliance with the covenants described above. At July 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 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 Amendment and carried over $6.2 million of unamortized deferred financing from initial execution 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)
|
|
July 31, 2021
|
|
October 31, 2020
|
|
Current portion of long-term debt
|
|
|
|
|
|
Gross term loan
|
|
$
|
32.5
|
|
|
$
|
120.0
|
|
|
Unamortized deferred financing costs
|
|
(1.1)
|
|
|
(3.3)
|
|
|
Current portion of term loan
|
|
$
|
31.4
|
|
|
$
|
116.7
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
Gross term loan
|
|
$
|
609.4
|
|
|
$
|
560.0
|
|
|
Unamortized deferred financing costs
|
|
(3.7)
|
|
|
(2.3)
|
|
|
Total noncurrent portion of term loan
|
|
605.6
|
|
|
557.7
|
|
|
Revolving line of credit(1)(2)
|
|
18.2
|
|
|
45.3
|
|
|
Long-term debt
|
|
$
|
623.8
|
|
|
$
|
603.0
|
|
(1) Standby letters of credit amounted to $148.8 million at July 31, 2021.
(2) At July 31, 2021, we had borrowing capacity of $1.1 billion, reflecting covenant restrictions.
Term Loan Maturities
During the three and nine months ended July 31, 2021, we made principal payments under the term loan of $8.1 million and $68.1 million, respectively. As of July 31, 2021, the following principal payments are required under the term loan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
2026
|
|
Debt maturities
|
|
$
|
8.1
|
|
|
$
|
32.5
|
|
|
$
|
32.5
|
|
|
$
|
32.5
|
|
|
$
|
32.5
|
|
|
$
|
503.8
|
|
Interest Rate Swaps
We enter into interest rate swaps to manage the interest rate risk associated with our floating-rate, LIBOR-based borrowings. Under these arrangements, we typically pay a fixed interest rate in exchange for LIBOR-based variable interest throughout the life of the agreement. We initially report the mark-to-market gain or loss on a derivative as a component of accumulated other comprehensive loss (“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 5, “Fair Value of Financial Instruments,” regarding the valuation of our interest rate swaps.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
Fixed Interest Rate
|
|
Effective Date
|
|
Maturity Date
|
|
|
|
|
|
|
|
|
|
$ 90.0 million
|
|
2.84%
|
|
November 1, 2018
|
|
October 31, 2021
|
|
$ 130.0 million
|
|
2.86%
|
|
November 1, 2018
|
|
April 30, 2022
|
|
$ 130.0 million
|
|
2.84%
|
|
November 1, 2018
|
|
September 1, 2022
|
At July 31, 2021 and October 31, 2020, amounts recorded in AOCL for interest rate swaps were a loss of $0.9 million, including tax expense of $0.1 million, and a loss of $3.3 million, net of a tax benefit 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 over the original term of our Credit Facility ending September 1, 2022. During the three and nine months ended July 31, 2021, we amortized $1.2 million, net of taxes of $0.4 million, and $3.5 million, net of taxes of $1.3 million, respectively, of this gain to interest expense. During the three and nine months ended July 31, 2020, we amortized $1.2 million, net of taxes of $0.5 million, and $3.6 million, net of taxes of $1.4 million, respectively. At July 31, 2021, the total amount expected to be reclassified from AOCL to earnings during the next 12 months is a loss of $0.6 million, net of a tax benefit of $0.1 million.
8. 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 July 31, 2021, these letters of credit and surety bonds totaled $148.8 million and $679.8 million, respectively.
Guarantees
In some instances, we offer clients guaranteed energy savings under certain energy savings contracts. At July 31, 2021, total guarantees were $238.0 million and extend through 2041. 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.
Sales Taxes
We collect sales tax from clients and remit those collections to the applicable states. When clients fail to pay their invoices, including the amount of any sales tax that we paid on their behalf, in some cases we are entitled to seek a refund of that amount of sales tax from the applicable state.
Sales tax laws and regulations enacted by the various states are subject to interpretation, and our compliance with such laws is routinely subject to audit and review by such states. Audit risk is concentrated in several states that are conducting ongoing audits. The outcomes of ongoing and any future audits and changes in the states’ interpretation of the sales tax laws and regulations could materially adversely impact our results of operations.
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 July 31, 2021, the total amount accrued for probable litigation losses where a reasonable estimate of the loss could be made was $14.4 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 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. The amounts above do not include any accrual or loss estimates with respect to the Bucio case, which are detailed 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.
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 ABM 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 which 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 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, which is currently pending. If the settlement is preliminarily approved, members of the certified 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. 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 July 31, 2021, and $112.9 million and $142.9 million of related expense in “Selling, general and
administrative expenses” in our unaudited Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ending July 31, 2021, respectively.
9. INCOME TAXES
Our quarterly tax provision is calculated using an estimated annual tax rate that is adjusted for discrete items occurring during the period to arrive at our effective tax rate. During the three and nine months ended July 31, 2021, we had effective tax rates of 9.7% and 28.9%, respectively, resulting in a tax benefit of $1.5 million and a tax provision of $37.4 million, respectively. During the three and nine months ended July 31, 2020, we had effective tax rates of 29.9% and (444.6)%, respectively, resulting in provisions for taxes of $24.0 million and $43.2 million, respectively. The effective tax rate for the nine months ended July 31, 2020, excluding an impairment loss of non-deductible goodwill of $163.8 million, was 28.0%. The difference between the effective tax rate and statutory rate is primarily related to tax credits. The rate difference between periods is driven by decreased income in 2021.
Our effective tax rate for the three months ended July 31, 2021, was impacted by a $2.9 million provision from change of tax reserves. Our effective tax rate for the three months ended July 31, 2020, was impacted by a discrete benefit of $0.8 million related to energy efficiency.
Our effective tax rate for the nine months ended July 31, 2021, was impacted by a $3.1 million provision from change of tax reserves and a $1.1 million benefit from energy efficiency incentives. Our effective tax rate for the nine months ended July 31, 2020, was impacted by an impairment loss of non-deductible goodwill as described in Note 5, a $1.9 million tax provision related to the Work Opportunity Tax Credit (“WOTC”), and a $1.2 million benefit related to energy efficiency.
In response to COVID-19, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (“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.
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.
10. SEGMENT INFORMATION
Our current reportable segments consist of B&I, T&M, Education, Aviation, and Technical Solutions, as further described below.
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REPORTABLE SEGMENTS AND DESCRIPTIONS
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B&I
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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.
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T&M
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T&M provides janitorial, facilities engineering, and parking services to industrial and high-tech manufacturing facilities.
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Education
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Education delivers janitorial, custodial, landscaping and grounds, facilities engineering, and parking services for public school districts, private schools, colleges, and universities.
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Aviation
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Aviation supports airlines and airports with services ranging from parking and janitorial to passenger assistance, catering logistics, air cabin maintenance, and transportation.
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Technical Solutions
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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.
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Financial Information by Reportable Segment
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Three Months Ended July 31,
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Nine Months Ended July 31,
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(in millions)
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2021
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2020
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2021
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2020
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Revenues
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Business & Industry
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$
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807.7
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$
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756.9
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$
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2,413.3
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$
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2,363.4
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Technology & Manufacturing
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246.1
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243.2
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741.6
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710.8
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Education
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208.4
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188.6
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632.0
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596.6
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Aviation
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175.7
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116.4
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467.2
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539.9
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Technical Solutions
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146.1
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119.2
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385.0
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383.5
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Elimination of inter-segment revenues
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(40.9)
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(30.1)
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(106.1)
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(91.1)
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$
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1,543.1
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$
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1,394.1
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$
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4,533.0
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$
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4,503.0
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Operating (loss) profit
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Business & Industry
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$
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84.7
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$
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71.6
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$
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255.6
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$
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169.1
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Technology & Manufacturing
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25.5
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24.5
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79.2
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60.9
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Education(1)
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17.7
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18.3
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52.8
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(56.3)
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Aviation(2)
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10.3
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(8.2)
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19.3
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(63.0)
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Technical Solutions(3)
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14.5
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13.2
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30.8
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13.1
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Government Services
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—
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—
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(0.1)
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—
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Corporate(4)
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(161.1)
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(24.8)
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(284.5)
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(97.7)
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Adjustment for income from unconsolidated affiliates, included in Aviation and Technical Solutions
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(0.5)
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(0.2)
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(1.4)
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(2.0)
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Adjustment for tax deductions for energy efficient government buildings, included in Technical Solutions
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(0.5)
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(0.8)
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(1.1)
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(1.2)
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(9.4)
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93.6
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150.6
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22.8
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Income from unconsolidated affiliates
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0.5
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0.2
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1.4
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2.0
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Interest expense
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(6.3)
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(13.8)
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(22.6)
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(34.5)
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(Loss) income from continuing operations before income taxes
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$
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(15.2)
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$
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80.0
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$
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129.4
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$
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(9.7)
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(1) Reflects impairment charges totaling $99.3 million on goodwill during the nine months ended July 31, 2020.
(2) Reflects impairment charges totaling $61.1 million on goodwill and intangible assets during the nine months ended July 31, 2020.
(3) Reflects impairment charges totaling $12.4 million on goodwill and intangible assets during the nine months ended July 31, 2020.
(4) Reflects accrued litigation settlement reserve totaling $112.9 million and $142.9 million for the Bucio case during the three and nine months ended July 31, 2021, respectively.
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.
11. SUBSEQUENT EVENTS
On August 25, 2021, we entered into a purchase agreement (the “Agreement”) with Crown Building Maintenance Co. and Crown Energy Services, Inc. (collectively, “Able”) and their owners. Under the terms of the Agreement, ABM will acquire Able for $830 million in cash, subject to customary adjustments for working capital and net debt. ABM will finance the acquisition with cash on hand and borrowings from our revolver under the Amended Credit Facility. The parties’ obligations to consummate the acquisition are subject to customary closing conditions, including conditions relating to the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.