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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, 2023
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
https://cdn.kscope.io/7c9d69e712d5ad269674c1c6891749e5-Abm final logo-10k.jpg
94-1369354
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
__________________________
One Liberty Plaza, 7th Floor
New YorkNew 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 classTrading Symbol Name of each exchange on which registered
Common Stock, $0.01 par valueABM 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 filerAccelerated
filer
Non-accelerated filerSmaller 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.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.  

Indicate by checkmark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to §240.10D-1(b).  

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, 2023 as reported on the New York Stock Exchange on that date: $2,778,907,185

Number of shares of the registrant’s common stock outstanding as of December 15, 2023: 62,861,118
_______________________________________________ 
DOCUMENTS INCORPORATED BY REFERENCE
Certain parts of the registrant’s Definitive Proxy Statement relating to the registrant’s 2024 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
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.

1


PART I
ITEM 1. BUSINESS.
General
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, infrastructure, and mobility 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 to more than $8.0 billion.
https://cdn.kscope.io/7c9d69e712d5ad269674c1c6891749e5-Capture.jpg
The acquisitions of OneSource and Linc Group in the early 2000s established ABM as a leader in the commercial janitorial market and also enhanced our ability to be a full-service facility solutions provider with new service offerings, including lighting, mechanical, and electrical “technical solutions.” With demand increasing for industry-specific service providers, the acquisition of Air Serv established “Aviation” as our first industry group. In recent years, we have strategically acquired companies in the United Kingdom (“UK”) and the Republic of Ireland (“Ireland”), 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. Through this initiative, we centralized key functional areas and industry groups, strengthened our sales capabilities, and initiated investments in service delivery tools and processes to help support standard operating practices that we believe remain 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 specialized 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, representing 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 expanded ABM’s sustainability and energy efficiency offerings amid growing demand for environmentally responsible solutions.
In 2022, we acquired RavenVolt, Inc. (“RavenVolt”), a leading nationwide provider of advanced turn-key microgrid systems utilized by diversified commercial and industrial customers, national retailers, utilities, and municipalities. A complementary extension of ABM’s Technical Solutions service offerings, the addition of RavenVolt enhanced ABM’s position as a market leader in electric vehicle (“EV”) charging infrastructure, power, and bundled energy solutions.
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In 2022, we acquired Momentum Support (“Momentum”), a leading independent provider of facility services, primarily janitorial, across Ireland and Northern Ireland. The addition of Momentum provided greater access to Momentum’s blue-chip customer base as well as an opportunity to cross sell ABM services to existing U.S.- and UK-based clients who also have an operational footprint in Ireland and Northern Ireland.
The above acquisitions and divestitures we’ve made since 2015 largely reflect strategies first introduced in our 2020 Vision initiative and also strategies included in our follow-on launched strategic plan called ELEVATE, which was introduced in 2021 and is described below.
As a result of these strategic initiatives and investments, we have strengthened our ability to offer janitorial, engineering, parking and eMobility, infrastructure, electrical, lighting and energy solutions, HVAC and mechanical services, landscaping and turf services, and mission critical solutions across aviation, education, manufacturing and distribution, and commercial business industries, on a standalone basis or in combination, and positioned ourselves as a leading integrated facilities management company.
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 embarked on the next step of its journey in 2021 with a multiyear strategic plan called ELEVATE. The ELEVATE strategy is designed to strengthen our industry leadership position through end-market repositioning and building on our core services, which we expect together will drive significant long-term value for our stakeholders.
We will continue to make significant investments over the life of the program, which are expected to total $200 - $215 million, and we will continue to implement various measures with the aim to ELEVATE:
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 TypeDescription
Monthly Fixed-PriceThese arrangements are contracts in which the client agrees to pay a fixed fee every month over a specified contract term.
Square-FootSquare-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-PlusThese 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 OrdersWork 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-PriceThese 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).
HourlyIn hourly arrangements, the client is billed a fixed hourly rate for each labor hour provided.
Management ReimbursementUnder 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 LocationUnder 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.
AllowanceUnder 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. The client agrees to pay us based on s predetermined contractual milestone schedule.
FranchiseWe franchise certain engineering services through individual and area franchises under the Linc Service and TEGG brands, which are part of ABM Technical Solutions.
Microgrid Systems Installation
Under these arrangements, we provide electrical contracting services for energy related products such as the installation of solar solutions, battery storage, distributed generation, and other specialized electric trades. The client agrees to pay us based on a predetermined contractual milestone schedule.


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Segment and Geographic Financial Information
Our current reportable segments consist of Business & Industry (“B&I”), Manufacturing & Distribution (“M&D”), Education, Aviation, and Technical Solutions. For segment and geographic financial information, see Note 17, “Segment and Geographic Information,” in the Notes to consolidated financial statements.
 REPORTABLE SEGMENTS AND DESCRIPTIONS
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B&I, our largest reportable segment, encompasses janitorial, facilities engineering, and parking services for commercial real estate properties (including corporate offices for high tech clients), sports and entertainment venues, and traditional hospitals and non-acute healthcare facilities. B&I also provides vehicle maintenance and other services to rental car providers. We typically provide these services 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.
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M&D provides integrated facility services, engineering, janitorial, and other specialized services to a variety of manufacturing, distribution, and data center facilities. We typically provide these services pursuant to monthly fixed-price, square-foot, and cost-plus, that are obtained through a competitive bid process as well as pursuant to work orders. One client accounted for approximately 32% of revenues for this segment in 2023.
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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. 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.
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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. 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 18% of revenues for this segment in 2023.
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Technical Solutions specializes in facility infrastructure, mechanical and electrical services, including EV power design, installation and maintenance, as well as microgrid systems design and installation. 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 electrical contracting services for energy related products such as the installation of solar solutions, battery storage, distributed generation, and other specialized electric trade..

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Service Marks, Trademarks, and Trade Names
We hold various service marks, trademarks, and/or trade names, such as “ABM,” “ABM Building Value,” “ABM GreenCare,” “ABM EnhancedClean,” “ABM EnhancedFacility,” “Linc Service,” “TEGG,” “ABM Connect,” “ABM Vantage,” “Momentum Support Services,” and “RavenVolt,” 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 single client accounted for more than 10% of our consolidated revenues during 2023, 2022, or 2021.
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, and productivity 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.
Macro-Economic Environment in Commercial Real Estate
We actively monitor the economic environment and its potential impact on demand for our services and our financial condition. Largely driven by the lingering effects of the pandemic, especially the normalization of hybrid work, the commercial real estate industry, particularly multi-tenant and owner-occupied commercial office buildings, is experiencing an increase in vacancy rates. Given that Class A and high-quality commercial office buildings are a key end market for the Company, we expect a decline in demand for janitorial services and work orders in these markets near-term. Longer term, we expect the vacancy rates of Class A and high-quality buildings to gradually decrease and our volume of work to stabilize.
Regulatory Environment
Our operations are subject to various federal, state, and/or local laws, rules, and regulations regulating among other things, labor, wages, and health and safety matters, as well as laws and regulations relating to the discharge of materials into the environment or otherwise relating to the protection of the environment. 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.
Environmental, Social, and Governance (“ESG”) Strategy and Oversight
As a company with over 110 years of history we understand the importance of embedding and integrating responsible and community-minded business practices into our operations and commit to standards to create value and support the long-term success of our business, shareholders, employees, and clients.
Our Board of Directors and its committees are responsible for overseeing the Company’s activities and practices relating to ESG. Our Board of Directors receives regular reports from meetings of its Governance Committee, which is responsible for oversight of the Company’s overall ESG-related framework, as well as from meetings of its Stakeholder and Enterprise Risk Committee, which is responsible for oversight of environmental and social matters within ESG. Additionally, our internal culture, sustainability, diversity, equity and inclusion teams work
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in cross functional collaboration with departments throughout and across the enterprise to advance our ESG strategies, and regularly present to the Board of Directors’ Stakeholder and Enterprise Risk Committee.
Since 2011, we have voluntarily published an ESG Impact Report on an annual basis in alignment with the Global Reporting Initiative framework and the Sustainability Accounting Standards Board to address our business, our employees, and the environment. More information about our ESG performance, progress, and goals can be found in the Human Capital section of this report and in the ESG section of the Company’s corporate website.
Human Capital
Given that ABM is a service-oriented business, our employees are the driving force behind our success, and we believe our ability to attract, develop, and retain our employees at all levels of our organization has a direct impact on client satisfaction and our ability to grow the Company. To succeed in a competitive labor market, ABM has developed key recruitment and retention strategies, objectives, and measures that we focus on as part of the overall management of our business. These strategies, objectives, and measures form the pillars of our human capital management framework and are advanced through the programs, policies and initiatives described below.
Direct labor costs represented 69% of our total revenue for 2023. As of October 31, 2023, we employed approximately 123,000 employees, of whom approximately 46,000, or 37%, were subject to various local collective bargaining agreements. As of October 31, 2023, our frontline employees represented 92% of our total workforce, while staff and management employees represented the other 8%.
Our human capital strategy is grounded and guided by our values and our employees. We prioritize our human capital development in order to do business in a responsible way and enable our employees’ and clients’ 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 drives the application of our core values of respect, integrity, collaboration, innovation, trust, and excellence throughout our operations. Our Code of Business Conduct serves as a critical tool to help all ABM team members to recognize and report unethical conduct, while preserving and nurturing our culture of honesty and accountability. We provide comprehensive annual training and certification programs 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 123,000 employees across the United States, UK, Ireland, and other locations, we have invested in and implemented a variety of systems and tools designed to centralize and standardize hiring and training practices, including regional recruitment strategies, applicant tracking technology, and incorporating modeling and advanced analytics that provide actionable insights relative to the candidate life cycle and turnover trends in our HR processes to drive ongoing improvement in the attraction, retention, and engagement of our frontline employees, who constitute the majority of our workforce.
In 2021, we successfully piloted a frontline leadership training program, which was launched enterprise-wide in 2022 and expanded further in 2023. This program is designed to enhance the management and coaching skills of frontline supervisors to improve the employee experience, create an environment for career growth, and increase retention.
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 enable us to execute for our clients in a safe and efficient manner.
Compensation and employee benefits
In addition, we offer competitive wages and salaries in our served markets and full-time employees have access to a continuum of health and wellness benefits, including medical, dental, vision, disability, and basic life and voluntary supplemental life and AD&D insurance, 401K employee savings and employee stock purchase programs, a 24/7 employee assistance program, healthcare flexible spending accounts, telemedicine options, legal support, as well as commuter, fitness, and other discount programs.
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Labor relations
With approximately 46,000 union-represented employees, we are party to more than 250 collective bargaining agreements nationwide, with 20 major labor unions. Our collective bargaining agreements include regional multiemployer agreements covering thousands of employees, as well as localized site agreements covering smaller groups. We strive to engage with our labor partners in an atmosphere of mutual respect, and seek to resolve disputes in a fair and equitable manner.
Safe working environment
ABM’s commitment to its team members is evidenced in its approach to risk management and safety. The Company’s programs are designed to meet or exceed compliance standards of the Occupational Safety and Health Administration and other regulatory bodies, and to protect the health and welfare of our employees and our clients. A cornerstone of ABM’s comprehensive risk management and safety program is safety awareness to confirm our employees are:

educated on how to complete tasks safely;
trained in hazard identification;
made aware of emergency response procedures to immediately address challenges; and
proficient in reporting accidents and utilizing applicable procedures to confirm appropriate loss mitigation techniques are implemented should a loss occur.
Our “Think Safe” approach to safety includes establishing a safety mindset from day one of employment. This safety culture is continuously reinforced through daily moments for safety messaging, relevant monthly training topics, and unique programs and materials created for our employees.
One of the cornerstones of our ThinkSafe program is designed to help leaders identify workplace hazards and implement changes to prevent accident or injury. In our frontline leader training, participants are guided in creating a culture of safety and provided guidance on practices to support our employees receiving the right care at the right time to expedite their recovery.
Culture and inclusion
With a widely distributed workforce serving over 20,000 clients across multiple nations and geographic regions, ABM’s culture, and the team member experience it supports, plays a vital role in attracting, retaining, and engaging talent. The Company works to develop an increasingly inclusive culture, where individuals from all backgrounds are equally able to contribute and are provided with opportunities to grow in their careers.
Guided by ABM’s mission and values and aligned with its ELEVATE strategy, the Company’s inclusive culture strategy is activated through its Culture & Inclusion Council. ABM’s President and CEO and Chief Human Resources Officer each serve as executive sponsors of the Culture & Inclusion Council, and reports of Culture & Inclusion Council activities are provided to the Board’s Stakeholder and Enterprise Risk Committee.
Additionally, 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 18, 2023
NameAgePrincipal Occupations and Business Experience
Scott Salmirs
61President 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.
Earl R. Ellis
58
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.
Joshua H. Feinberg49
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.
Rene Jacobsen62
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.
Sean M. Mahoney57Executive 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.
Andrea R. Newborn60
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 2017; Senior Vice President, General Counsel, and Secretary of The Reader’s Digest Association, Inc. from March 2007 to February 2014.
Raúl Valentin
60
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.
Dean A. Chin
55
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 Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) and the consolidated financial statements and accompanying notes (the “Financial Statements”).
Risks Relating to Our Strategy and Operations
Our success depends on our ability to gain profitable business despite competitive market pressures.
Each market we provide services for is highly competitive and such competition is based primarily on price, quality of service, reputation, and ability to anticipate and respond to industry changes. A majority of our revenue is derived from services that require competitive bids from multiple suppliers. The low barrier 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 insight into local market dynamics and significantly lower operating costs, which could provide 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 market shifts and changing technology, we may 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 results of operations can be adversely affected by labor shortages, turnover, and labor cost increases.
We employ approximately 123,000 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 similarly skilled employees. During 2023, we continued to be impacted by labor shortages, inflationary pressures on wages, and an increasingly competitive labor market. Continued labor shortages or increased turnover rates within our employee base could lead to increased costs, such as increased overtime incurred and/or increased usage of temporary labor to meet the demands of our customers, as well as 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.

We may not be able to attract and retain qualified personnel and senior management we need to support our business.
Our future performance depends on the continuing efforts and contributions of our senior management and on our continued ability to attract and retain qualified personnel. Unplanned turnover in senior management or inability to attract and retain qualified personnel could have a negative effect on our results of operations. In addition, activities related to identifying, recruiting, hiring, and integrating qualified management employees may require significant time and expense. We may not be able to locate suitable replacements for any key employees who leave, or offer employment to potential replacements on reasonable terms, each of which may adversely affect our business and financial results.
Investments in and changes to our businesses, operating 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 significant investments and expect to make additional investments in various initiatives intended to drive long-term profitable growth and increase operational efficiency. These investments in and changes
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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 disruptions to our back-office operations and service delivery. Moreover, the execution and/or benefits of our ELEVATE strategy may not be realized on the expected timeline and/or may result in expenses in excess of what is currently forecast, which could negatively affect our financial condition.
Our ability to preserve long-term client relationships is essential to our continued success.
We depend to a large extent on our relationships with clients and our reputation for quality integrated facility solutions. Maintaining our existing client relationships, particularly with our largest clients, is an important factor contributing to our business 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 and/or all or a portion of the services for our larger clients, our financial results could be negatively impacted.
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 controls and programs in place 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.
Our international business involves risks different from those we face in the United States that could negatively impact our results of operations and financial condition.
We have business operations in jurisdictions outside of the United States, most significantly in the UK and Ireland. 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 UK Modern Slavery Act, the Criminal Law (Human Trafficking) Act 2008 (Ireland), the UK Bribery Act, the Criminal Justice (Corruption Offences) Act 2018 (Ireland), and the UK and European Union General Data Protection Regulations (the “GDPR”). The failure to comply with these laws or regulations could subject us to significant litigation, monetary damages, regulatory enforcement actions, or fines in one or more jurisdictions.
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 UK 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.
Risks Relating to Market and Economic Conditions
Decreases in commercial office space utilization due to hybrid work models could adversely affect our financial condition.
A key part of our business involves providing janitorial, facilities engineering, and parking services for commercial office building properties. Across the United States, vacant office spaces have increased and total office space under construction has decreased, compared to pre-pandemic levels. Driven by lower in-office occupancy,
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lessees are projected to continue to decrease their office space requirements as existing leases expire or are renewed and/or renegotiated over the next several years. As existing clients decrease office space, the areas that we service for those clients decreases as does the demand for our highly profitable supplemental services (“work orders”) requested by our clients outside the scope of our standard service specifications. As new tenants occupy vacant office spaces, there may be delays and additional expenses incurred in securing client relationships with such new tenants. These factors could adversely affect our revenues and financial results.
Negative changes in general economic conditions, such as recessionary pressures, high interest rates, durable and non-durable goods pricing, changes in energy prices, or changes in consumer goods pricing could reduce the demand for our services and, as a result, reduce our revenue and earnings and adversely affect our financial condition.
Slowing economic activity or other negative changes in global, national, and local economic conditions could have a negative impact on our business. These adverse economic conditions could cause a decline in our clients’ demand for our services and/or in scope of work, including work orders and our clients’ ability to pay for such services, or attempts by our clients to defer payments owed to us. Further, potential declines in economic conditions could result in depressed prices for our services, which could affect our financial condition.
We offer a portfolio of capital projects, which are designed to reduce a client’s overall consumption of commodities, such as electricity and natural gas. Downward fluctuations in commodity prices, and/or elevated interest rates, may reduce client demand for such projects. Additionally, we 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 capital projects. All of these factors could have an adverse effect on our financial condition, results of operations, and cash flows.
Risks Relating to Acquisitions, 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. 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:
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.
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
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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 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.
Our ongoing implementation of new enterprise resource planning (“ERP”) and related boundary systems could adversely impact our ability to operate our business and report our financial results.
We utilize multiple platforms and ERP systems to record transactions, provide information to management, and prepare our financial statements. We are in the process of transitioning our ERP and other key boundary systems. This transition began in the third quarter of 2023 and will continue for the next couple of years. While we believe our new ERP and boundary systems will enhance and standardize our processes, allow better oversight, and improve our service to our customers, any disruption to this transition could impact our ability to send and track invoices, process vendor payments, pay employees, fulfill contractual obligations, report our financial results, or otherwise operate our business. Such disruption could adversely affect our profitability and reputation. Additionally, any disruption could negatively impact the effectiveness of our controls. Refer to “Risk Relating to Financial Matters” below for further information on the internal controls.
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
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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.
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 frequency of accidents or events that might increase our liability. 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 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 these lawsuits 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.
We are subject to extensive legal and regulatory requirements, which could limit our profitability by increasing the costs of legal and regulatory compliance.
Our business is subject to a complicated set of federal, state, and local laws and regulations as well as stakeholder views addressing, among other things, wage and hour standards, employment and labor relations, ESG-related practices, leave of absence, cybersecurity, data privacy and protection, occupational health and safety, environmental matters, anti-competition, anti-corruption, and government contracting. Many of these laws and regulations may have differing or conflicting legal standards or legal interpretations across jurisdictions, increasing the complexity and cost of compliance. When federal, state, local, or foreign minimum wage rates increase, we may have to increase the wages of both minimum wage employees and employees whose wages are above the minimum wage. We may also face increased operating costs resulting from changes in federal, state, or local laws and regulations relating to employment matters, including those relating to meal and rest breaks, eligibility for overtime, pay transparency and reporting, sick pay, and predictive scheduling requirements. In addition, we expect there will likely be increasing levels of regulation, disclosure-related and otherwise, with respect to ESG matters, and increased regulation will likely lead to increased compliance costs as well as scrutiny that could heighten all of the risks identified in this risk factor. Increased costs of legal and regulatory compliance with this constantly evolving legal and regulatory environment could reduce our profitability and adversely affect our financial condition.
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.
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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, 2023, approximately 37% of our employees were subject to various local collective bargaining agreements, some of which will expire or become subject to renegotiation during 2024. 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 increases 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 UK and Ireland. 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 from taxing jurisdictions. We regularly assess the likelihood of adverse outcomes resulting from these audits to determine the adequacy of our income tax related provision. 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, treaties, 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 Financial Matters
Future increases in the level of our borrowings or in interest rates could affect our results of operations.
The Federal Reserve Board increased interest rates in 2022 and 2023, and these increases may continue in 2024 and beyond. Such rate increases have corresponding impact to our costs of borrowing and may have an adverse impact on our ability to raise funds through the offering of our securities or through the issuance of debt due to higher debt capital costs, diminished credit availability, and less favorable equity markets. Any significant additional federal fund rate increases may have a material adverse effect on our business, results of operations, and financial condition, and may cause our customers to implement cost saving strategies that could reduce the demand of our services.
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 service 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
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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.
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 COVID-19 pandemic (“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 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, 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 and portions of our Technical Solutions business, adverse weather conditions can lead to reduced 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
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experience reduced revenues in our B&I segment, as many of our contracts specify additional payments for snow-related services.
Catastrophic events, disasters, pandemics, 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 or strategy, 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.
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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, 2023
LocationCharacter of OfficeApproximate Square FeetLease Expiration Date, Unless OwnedSegment
Dallas, TexasWarehouse and Operations Support27,5009/30/2028Technical Solutions, B&I, Aviation, Corporate, and M&D
Atlanta, GeorgiaOperations Support37,00010/31/2027All
New York, New York Corporate Headquarters44,0001/3/2032Corporate and B&I
Sugar Land, TexasEnterprise Services62,5003/31/2028All
Tustin, CaliforniaOperations Support40,0007/31/2029B&I and Technical Solutions
San Francisco, CaliforniaOperations Support21,3246/30/2029B&I and Corporate
Cummings, GeorgiaOperations Support57,6371/31/2034Technical 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.
Information with respect to legal matters 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.


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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 15, 2023, there were 2,945 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 “Share Repurchase Program”). Effective December 9, 2022, and December 13, 2023, our Board of Directors expanded the Share Repurchase Program by $150.0 million and $150.0 million, respectively. Share repurchases may take place on the open market or otherwise, and all or part of the repurchases may be made pursuant to Rule 10b5-1 plans or in privately negotiated transactions. The timing of repurchases is at our discretion and will depend upon several factors, including market and business conditions, future cash flows, share price, share availability, and other factors. Repurchased shares are retired and returned to an authorized but unissued status. At October 31, 2023, authorization for $60.3 million of repurchases remained under the Share Repurchase Program.
Issuer Purchases of Equity Securities
(in millions, except per share amounts)Total Number of Shares Purchased
Average Price Paid per Share(1)
Total Number of Shares Purchased as Part of Publicly Announced PlanApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plan
Period
8/1/2023 – 8/31/2023
— — $— $170.3 
9/1/2023 – 9/30/2023
$1.4 $40.24 $1.4 $115.3 
10/1/2023 – 10/31/2023
1.3 $41.41 1.3 $60.3 
Total2.7$40.82 2.7
(1) Average price paid per share does not include any excise tax for stock repurchases as part of the Inflation Reduction Act of 2022.
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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.
https://cdn.kscope.io/7c9d69e712d5ad269674c1c6891749e5-Picture2.jpg
INDEXED RETURNS
Years Ended October 31,
Company / Index201820192020202120222023
ABM Industries Incorporated$100.0 $121.0 $117.8 $151.9 $156.5 $141.2 
S&P 500 Index$100.0 114.3 125.4 179.3 153.1 168.6 
S&P SmallCap 600 Index$100.0 103.2 95.3 151.4 133.5 123.3 
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.

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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 2023 our U.S. operations generated approximately 93% 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 continue to focus our efforts on:
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 we expect to fundamentally change how we operate our business.
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, employee retention, and recruiting; and the upgrade of our Enterprise Resource Planning and payroll systems.
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Developments and Trends
Macro-Economic Environment in Commercial Real Estate and Other
We actively monitor the economic environment and its potential impact on demand for our services and our financial condition. Largely driven by the lingering effects of the Pandemic, especially the normalization of hybrid work, the commercial real estate industry, particularly multi-tenant and owner-occupied commercial office buildings, is experiencing an increase in vacancy rates. Given that Class A and high-quality commercial office buildings are a key end market for the Company, we expect a decline in demand for janitorial services and work orders in these markets near-term. As a result, we expect our B&I industry to experience muted growth in the near-term. Longer term, we expect the vacancy rates of Class A and high-quality buildings to gradually decrease and our volume of work to stabilize.
We expect a large client within M&D to rebid and rebalance their work needs in 2024 as part of their procurement process. While we still expect to retain a large portion of this business, we expect M&D’s financial results to be impacted in the near-term.
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 the 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. 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 2023 by $14.8 million. In 2022, we decreased our total reserves related to prior year claims by $36.8 million.
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Key Financial Highlights
Revenues increased by $289.8 million, or 3.7%, to $8,096.4 million during 2023, as compared to 2022. Revenue growth was comprised of organic growth of 2.4% and acquisition growth of 1.3%. Acquisition growth of $104.4 million was driven by the RavenVolt and Momentum acquisitions, completed in the fourth and second quarter of 2022, respectively. Organic growth was primarily driven by the strong leisure and business travel markets served by Aviation, expansion of new business and growth with current customers in M&D, and net new business wins in Education. The increase in revenues was partially offset by a decrease in the overall volume of work orders, lower project revenues within Technical Solutions, and soft commercial office market conditions in B&I.
Operating profit increased by $60.7 million to $409.5 million during 2023, as compared to 2022. The increase in operating profit was attributable to the revenue increase and:
a decrease in the fair value of the contingent consideration related to the RavenVolt Acquisition; and
an Employee retention credit (“ERC”) refund received.
The increase was partially offset by:
a decrease in favorable self-insurance adjustments related to prior year claims as a result of actuarial evaluations completed on our workers’ compensation, general liability, automobile liability, and property damage insurance plans; and
a decrease in work orders, which are generally more profitable than contracted service.
Our effective tax rate on income was 24.1% for 2023, as compared to 25.7% during 2022.
Net cash provided by operating activities was $243.3 million during 2023. Our net cash provided by operating cash activities were higher than prior year, primarily due to the timing of certain working capital requirements, which included a $143.8 million payment for the Bucio case in 2022, and the related income tax benefit.
Dividends of $57.5 million were paid to shareholders, and dividends totaling $0.88 per common share were declared during 2023. Additionally, we repurchased 3.3 million of shares for $138.1 million, including excise taxes during 2023.
At October 31, 2023, total outstanding borrowings under our Amended Credit Facility were $1,313.8 million, and we had up to $483.0 million of borrowing capacity.
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Results of Operations
Consolidated
Years Ended October 31,
2023 vs. 2022
($ in millions)202320222021Increase / (Decrease)
Revenues$8,096.4 $7,806.6 $6,228.6 $289.8 3.7%
Operating expenses7,037.6 6,757.5 5,258.2 280.1 4.1%
Gross margin13.1 %13.4 %15.6 %(36) bps
Selling, general and administrative expenses572.8 628.3 719.2 (55.5)(8.8)%
Amortization of intangible assets 76.5 72.1 45.0 4.4 6.1%
Operating profit409.5 348.8 206.3 60.7 17.4%
Income from unconsolidated affiliates3.9 2.4 2.1 1.5 60.1%
Interest expense(82.3)(41.1)(28.6)(41.2)(99.9)%
Income before income taxes
331.1 310.0 179.8 21.1 6.8%
Income tax provision(79.7)(79.6)(53.5)(0.1)(0.2)%
Net income251.3 230.4 126.3 20.9 9.1%
Other comprehensive income
Interest rate swaps(0.5)36.7 4.5 (37.2)NM*
Foreign currency translation and other7.3 (19.8)5.3 27.1 NM*
Income tax provision0.1 (10.5)(1.5)10.6 NM*
Comprehensive income$258.1 $236.9 $134.5 $21.2 9.0%
*Not meaningful
The Year Ended October 31, 2023, Compared with the Year Ended October 31, 2022
Revenues
Revenues increased by $289.8 million, or 3.7%, to $8,096.4 million during 2023, as compared to 2022. Revenue growth was comprised of organic growth of 2.4% and acquisition growth of 1.3%. Acquisition growth of $104.4 million was driven by the RavenVolt and Momentum acquisitions, completed in the fourth and second quarter of 2022, respectively. Organic growth was primarily driven by the strong leisure and business travel markets served by Aviation, expansion of new business and growth with current customers in M&D, and net new business wins in Education. The increase in revenues was partially offset by a decrease in the overall volume of work orders, lower project revenues within Technical Solutions, and soft commercial office market conditions in B&I.
Operating Expenses
Operating expenses increased by $280.1 million, or 4.1%, to $7,037.6 million during 2023, as compared to 2022. Gross margin decreased by 36 bps to 13.1% in 2023, as compared to 13.4% in 2022. The decrease in gross margin was primarily driven by the decrease in favorable self-insurance adjustments related to prior year claims as a result of actuarial evaluations completed on our workers’ compensation, general liability, automobile liability, and property damage insurance plans. In addition, gross margins were impacted by a decrease in work orders, which are generally more profitable than contracted service.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $55.5 million, or 8.8%, to $572.8 million during 2023, as compared to 2022. The decrease in selling, general and administrative expenses was primarily attributable to:
a $45.6 million decrease in the fair value of contingent consideration related to the RavenVolt Acquisition;
a $24.0 million benefit from ERC refunds received; and
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a $6.6 million decrease in certain technology projects primarily attributable to discrete transformational costs under our ELEVATE strategy for developing the new ERP system, client-facing technology, workforce management tools, and data analytics;
This decrease was partially offset by:
a $10.8 million increase in bad debt, of which $7.7 million relates to a favorable adjustment in the prior year;
an absence of a $7.6 million gain on the sale of a group of customer contracts related to healthcare technology management services within Technical Solutions during 2022; and
a $4.6 million increase in unfavorable self-insurance adjustment related to prior year claims as the result of actuarial evaluations completed on our medical and dental self-insurance plans.
Amortization of Intangible Assets
Amortization of intangible assets increased by $4.4 million, or 6.1%, to $76.5 million during 2023, as compared to 2022. This increase was primarily due to the amortization of intangibles acquired as part of the RavenVolt and Momentum acquisitions.
Interest Expense
Interest expense increased by $41.2 million, or 99.9%, to $82.3 million during 2023, as compared to 2022, primarily driven by higher interest rates on our debt borrowings.
Income Taxes
During 2023 and 2022, we had effective tax rates of 24.1% and 25.7%, respectively, resulting in a provision for tax of $79.7 million and $79.6 million, respectively. . Our effective tax rate for 2023 was impacted by a $12.8 million benefit related to the non-taxable change in the fair value of the contingent consideration related to the RavenVolt Acquisition, a $2.2 million benefit for share-based compensation; and a $1.5 million benefit for return to provision adjustment primarily related to state and local deferred income taxes; partially offset by a $4.8 million expense related to non-deductible executive compensation. Our effective tax rate for 2022 was impacted by the following items: an $8.1 million benefit for uncertain tax positions with expiring statutes; a $1.4 million benefit for share-based compensation; and a $1.3 million return to provision adjustments.
Interest Rate Swaps
We had a loss of $0.5 million on interest rate swaps during the year ended October 31, 2023, as compared to a gain of $36.7 million during the year ended October 31, 2022, 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 $7.3 million during the year ended October 31, 2023, as compared to a foreign currency translation loss of $19.8 million during the year ended October 31, 2022. This change was due to fluctuations in the exchange rate between the U.S. Dollar (“USD”) and the British pound sterling (“GBP”). Future gains and losses on foreign currency translation will be dependent upon changes in the relative value of foreign currencies to the USD and the extent of our foreign assets and liabilities.
The Year Ended October 31, 2022, Compared with the Year Ended October 31, 2021
For a comparison of our Results of Operations for the year ended October 31, 2022, to the year ended October 31, 2021, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the fiscal year ended October 31, 2022, filed with the SEC on December 21, 2022.
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Segment Information
Our current reportable segments consist of B&I, M&D, Education, Aviation, and Technical Solutions.
Financial Information for Each Reportable Segment
 Years Ended October 31,
2023 vs. 2022
($ in millions)202320222021Increase / (Decrease)
Revenues
Business & Industry$4,089.4 $4,095.9 $2,853.8 $(6.5)(0.2)%
Manufacturing & Distribution1,526.7 1,445.2 1,363.1 81.5 5.6%
Education880.4 834.7 830.8 45.7 5.5%
Aviation925.7 804.0 651.1 121.7 15.1%
Technical Solutions674.2 626.8 529.8 47.4 7.6%
$8,096.4 $7,806.6 $6,228.6 $289.8 3.7%
Operating profit (loss)
Business & Industry$315.6 $334.9 $285.9 $(19.3)(5.7)%
Operating profit margin7.7 %8.2 %10.0 %(46) bps
Manufacturing & Distribution161.7 161.8 155.5 (0.1)—%
Operating profit margin10.6 %11.2 %11.4 %(60) bps
Education49.7 47.1 61.5 2.6 5.5%
Operating profit margin5.6 %5.6 %7.4 %— bps
Aviation60.0 29.3 32.1 30.7 NM*
Operating profit margin6.5 %3.6 %4.9 %283 bps
Technical Solutions53.2 63.8 49.4 (10.6)(16.5)%
Operating profit margin7.9 %10.2 %9.3 %(228) bps
Government Services— (0.3)(0.2)0.3 NM*
Operating profit marginNM*NM*NM*NM*
Corporate(226.6)(284.5)(374.6)(57.9)20.3%
Adjustment for income from unconsolidated
   affiliates, included in Aviation
(3.9)(2.4)(2.1)(1.5)(60.1)%
Adjustment for tax deductions for energy
   efficient government buildings, included in
   Technical Solutions
(0.3)(0.9)(1.2)0.6 66.8%
$409.5 $348.8 $206.3 $60.7 17.4%
*Not meaningful

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The Year Ended October 31, 2023, Compared with the Year Ended October 31, 2022
Business & Industry
 Years Ended October 31,
($ in millions)20232022Increase
Revenues$4,089.4 $4,095.9 $(6.5)(0.2)%
Operating profit315.6 334.9 (19.3)(5.7)%
Operating profit margin7.7 %8.2 %(46) bps
B&I revenues decreased by $6.5 million, or 0.2%, to $4,089.4 million during 2023, as compared to 2022. This decrease in revenue was comprised of acquisition growth of 0.8%, offset by organic decrease of 0.9%. Acquisition growth of $32.1 million was driven by the Momentum Acquisition, completed in the second quarter of 2022. Organic decrease was primarily driven by decrease in work orders, soft commercial office market conditions, and the expected attrition of certain engineering clients. Management reimbursement revenues for this segment totaled $270.1 million and $227.8 million during 2023 and 2022, respectively.
Operating profit decreased by $19.3 million, or 5.7%, to $315.6 million during 2023, as compared to 2022. Operating profit margin decreased by 46 bps to 7.7% in 2023 from 8.2% in 2022. The decrease in operating profit margin was primarily driven by a decrease in work orders, which are generally more profitable than contracted service, the change in contract mix, and an increase in direct labor and related costs due to a limited labor supply in certain non-union markets. The decrease was partially offset by lower amortization of intangible assets.
Manufacturing & Distribution
 Years Ended October 31,
($ in millions)20232022Increase
Revenues$1,526.7 $1,445.2 $81.5 5.6%
Operating profit161.7 161.8 (0.1)—%
Operating profit margin10.6 %11.2 %(60) bps
M&D revenues increased by $81.5 million, or 5.6%, to $1,526.7 million during 2023, as compared to 2022. The increase was primarily attributable to the net new business wins and the expansion of business with existing customers, partially offset by a decrease in work orders.
Operating profit decreased by $0.1 million, to $161.7 million during 2023, as compared to 2022. Operating profit margin decreased by 60 bps to 10.6% in 2023 from 11.2% in 2022. The decrease in operating profit margin was primarily attributable to the change in contract mix and decrease in work orders, which are generally more profitable than contracted service.
Education
 Years Ended October 31,
($ in millions)20232022Increase
Revenues$880.4 $834.7 $45.7 5.5%
Operating profit49.7 47.1 2.6 5.5%
Operating profit margin5.6 %5.6 %— bps
Education revenues increased by $45.7 million, or 5.5%, to $880.4 million during 2023, as compared to 2022. The increase was primarily attributable to net new business wins, partially offset by a decrease in work orders.
Operating profit increased by $2.6 million, or 5.5% to $49.7 million during 2023, as compared to 2022. Operating profit margin of 5.6% in 2023 was consistent with 2022. The operating profit margin was positively impacted by labor efficiencies and lower amortization of intangible assets, offset by an increase in start-up supplies to support new business growth and the decrease in work orders, which are generally more profitable than contracted service.
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Aviation
 Years Ended October 31,
($ in millions)20232022Increase
Revenues$925.7 $804.0 $121.7 15.1%
Operating profit60.0 29.3 30.7 NM*
Operating profit margin6.5 %3.6 %283 bps
Aviation revenues increased by $121.7 million, or 15.1% to $925.7 million, during 2023, as compared to 2022. The increase was primarily attributable to a recovery in leisure and business travel (both domestic and international) and new parking-related services. In addition, we recognized $11.4 million in revenue from an Aviation parking project, whereby all the direct labor and related costs were recognized in prior periods. The related revenue was not recognized in the prior periods since the criteria for revenue recognition was not met until February 2023. Management reimbursement revenues for this segment totaled $31.8 million and $52.6 million during 2023 and 2022, respectively.
Operating profit increased by $30.7 million, to $60.0 million during 2023, as compared to 2022. Operating profit margin increased to 6.5% during 2023, from 3.6% during 2022. The increase in operating profit margin was primarily attributable to the $11.4 million in revenue from an Aviation parking project. Operating profit margin was negatively impacted by an increase in direct labor and related costs due to increased headcounts as travel continues to recover.
Technical Solutions
 Years Ended October 31,
($ in millions)20232022Increase / (Decrease)
Revenues$674.2 $626.8 $47.4 7.6%
Operating profit53.2 63.8 (10.6)(16.5)%
Operating profit margin7.9 %10.2 %(228) bps
Technical Solutions revenues increased by $47.4 million, or 7.6%, to $674.2 million during 2023, as compared to 2022. Revenue growth included acquisition growth of 11.5%, which was partially offset by an organic decrease of 3.9%. Acquisition growth of $72.3 million was driven by the RavenVolt Acquisition, which was completed in the fourth quarter of 2022. The organic revenue decrease was primarily driven by the decline in electric vehicle charging station installation sales and lower project revenues due to the timing of completions of certain bundled energy solutions projects.
Operating profit decreased by $10.6 million, or 16.5%, to $53.2 million during 2023, as compared to 2022. Operating profit margin decreased by 228 bps to 7.9% in 2023 from 10.2% in 2022. The decrease in operating profit margin was primarily attributable to a $7.6 million gain recognized on the sale of a group of customer contracts related to healthcare technology management services recognized in the prior year, and amortization of intangible assets related to the RavenVolt Acquisition, partially offset by the contract mix.
Corporate
 Years Ended October 31,
($ in millions)20232022Decrease
Corporate expenses$(226.6)$(284.5)$(57.9)20.3%
Corporate expenses decreased by $57.9 million, or 20.3%, to $226.6 million during 2023, as compared to 2022. The decrease in corporate expenses was primarily related to:
a $45.6 million decrease in the fair value of contingent consideration related to the RavenVolt Acquisition;
a $24.0 million benefit from ERC refunds received;
a $6.6 million decrease in certain technology projects primarily attributable to discrete transformational costs under our ELEVATE strategy for developing the new ERP system, client-facing technology, workforce management tools, and data analytics;
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a $6.4 million decrease in compensation and related expenses primarily due to lower compensation under certain incentive plans; and
a $2.4 million decrease in acquisition and integration costs primarily attributable to our prior years’ acquisitions.
This decrease was partially offset by:
a $22.0 million decrease in favorable self-insurance adjustments related to prior year claims as the result of actuarial evaluations completed on our workers’ compensation, general liability, automobile liability, and property damage insurance plans; and
a $4.6 million increase in unfavorable self-insurance adjustment related to prior year claims as the result of actuarial evaluations completed on our medical and dental self-insurance plans.
The Year Ended October 31, 2022, Compared with the Year Ended October 31, 2021
For a comparison of our Segment Information for the year ended October 31, 2022, to the year ended October 31, 2021, 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, 2022, filed with the SEC on December 21, 2022.
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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 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 our operating cash flows and borrowing capacity under our credit facility are sufficient to fund our cash requirements for at least a 12-month period from the issuance of these financial statements. 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.
Debt Facilities
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 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 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. We may repay amounts borrowed under the Amended Credit Facility at any time without penalty.
At November 1, 2022, we amended our Amended Credit Facility pursuant to the LIBOR Transition Amendment and the Fifth Amendment to replace the benchmark rate at which U.S.-dollar-denominated borrowings bear interest from LIBOR to the forward-looking SOFR term rate administered by CME Group Benchmark Administration Limited. As a result of these amendments, we can borrow at Term SOFR plus a credit spread adjustment of 0.10% subject to a floor of zero.
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 October 31, 2023, we were in compliance with these covenants and expect to be in compliance in the foreseeable future.
On March 1, 2022, we entered into a new uncommitted receivable repurchase facility (the “Receivables Facility”) of up to $150 million, which expired on March 30, 2023. This facility was considered a secured borrowing and provided the buyer with customary rights of termination upon the occurrence of certain events of default. We have guaranteed all of the sellers’ obligations under the facility.
During 2023, we made $32.5 million of principal payments under the term loan. At October 31, 2023, the total outstanding borrowings and standby letters of credit were $1,313.8 million and $58.2 million, respectively. At October 31, 2023, we had up to $483.0 million of borrowing capacity.
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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. Effective December 9, 2022, and December 13, 2023, our Board of Directors expanded the Share Repurchase Program by $150.0 millionand $150.0 million, respectively. We repurchased shares under the share repurchase program during the year ended October 31, 2023, as summarized below. At October 31, 2023, authorization for $60.3 million of repurchases remained under the Share Repurchase Program.
Years Ended October 31,
(in millions, except per share amounts)20232022
Total number of shares purchased3.3 2.3 
Average price paid per share(1)
$41.06 $42.15 
Total cash paid for share repurchases(1)
$137.1 $97.5 
(1) Average price paid per share and total cash paid for share repurchases do not include any excise tax for stock repurchases as part of the Inflation Reduction Act of 2022.
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 among other things, labor, wages, and health and safety matters, as well as laws and regulations relating to the discharge of materials into the environment or otherwise relating to the protection of the environment. 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
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settlements.
 Years Ended October 31,
(in millions)202320222021
Net cash provided by operating activities243.3 20.4 314.3 
Net cash used in investing activities(62.1)(241.5)(740.0)
Net cash (used in) provided by financing activities(186.3)235.5 92.4 
Operating Activities
Net cash provided by operating activities of continuing operations increased by $222.9 million during 2023, as compared to 2022. The increase was primarily driven by a $143.8 million payments made for the Bucio settlement in 2022, and the related income tax benefit.
Net cash provided by operating activities of continuing operations decreased by $293.9 million during 2022, as compared to 2021. The decrease was primarily driven by payments made for the Bucio settlement, which was recorded within “Other Accrued Liabilities” in the Consolidated Balance Sheets, and deferred remittance of payroll taxes in the current year and the timing of client receivable collections and vendor payments.
Investing Activities
Net cash used in investing activities changed by $179.5 million during 2023, as compared to 2022. The change was primarily related to the Momentum and RavenVolt acquisitions, completed in 2022.
Net cash used in investing activities changed by $498.5 million during 2022, as compared to 2021. The change was primarily related to the Able Acquisition during the fourth quarter of 2021, partially offset by Momentum and RavenVolt acquisitions.
Financing Activities
Net cash used in financing activities was $186.3 million in 2023, as compared to net cash provided by financing activities of $235.5 million in 2022. The change was primarily related to a decrease in net borrowings from our Amended Credit Facility, as in 2022 we had higher borrowings to fund Momentum and RavenVolt acquisitions, and higher share repurchases in 2023.
Net cash provided by financing activities was $235.5 million in 2022, as compared to $92.4 million in 2021, primarily due to higher net borrowings to fund acquisitions and working capital requirements.
Dividends
On December 13, 2023, we announced a quarterly cash dividend of $0.225 per share on our common stock, payable on February 5, 2024, to shareholders of record on January 4, 2024. We declared a quarterly cash dividend on our common stock every quarter during 2023, 2022, and 2021. We paid total annual dividends of $57.5 million, $51.9 million, and $51.0 million during 2023, 2022, and 2021, respectively.

Material Cash Requirements from Contractual and Other Obligations

As of October 31, 2023, 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 $1,313.8 million, with $32.5 million payable within 12 months. We have future interest payments based on our hedged borrowings under our Amended Credit Facility of $16.8 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, “Debt,” 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
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and finance lease obligations were $168.0 million, with $42.2 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 $88.2 million, with $25.0 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 $122.4 million, with $41.0 million payable within 12 months.

Benefit Obligations – Expected future payments relating to our defined benefit, postretirement, and deferred compensation plans were $38.2 million, with $3.3 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, 2023.

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 2023, 2022, and 2021, contributions made to these plans were $574.6 million, $555.1 million, and $348.8 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, 2023, our self-insurance reserves, net of recoverables, were $487.9 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.

Unrecognized Tax Benefits – At October 31, 2023, our total liability for unrecognized tax benefits was $11.6 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 utilization of credits and net operating loss carryforwards as well as other offsets, including the indirect benefit from other taxing jurisdictions that may be available.

Contingent Consideration Payable in Connection with Our Acquisition of RavenVolt At October 31, 2023, contingent consideration of up to $280.0 million in cash may be paid in calendar years 2024, 2025, and 2026, if the RavenVolt business achieves certain financial targets, as defined in the merger agreement, in calendar years 2023, 2024, and 2025. We do not expect the RavenVolt business to achieve the aforementioned financial targets for calendar year 2023, and as such, we do not expect contingent consideration to be payable in the next 12 months.
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, 2023, these letters of credit totaled $58.2 million, and surety bonds and surety-backed letters of credit totaled $776.2 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.
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Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in accordance with United States generally accepted accounting principles (“U.S. GAAP”) 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. We removed “Contingent Consideration” from our critical accounting policies and estimates in 2023. There have been no other significant changes to our critical accounting policies and estimates for the year ended October 31, 2023. We believe the following critical accounting policies govern the more significant judgments and estimates used in the preparation of our Financial Statements.

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DescriptionJudgments and UncertaintiesEffect if Actual Results Differ from Assumptions
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.

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, 2023, we had $2.5 billion of goodwill. Our goodwill is included in the following segments:

$1.1 billion — B&I

$502.2 million — M&D

$459.3 million — Education

$69.0 million — Aviation

$368.0 million — Technical Solutions

A goodwill impairment analysis was performed for each of our reporting units on August 1, 2023. Based on these studies, the implied fair value of each of our reporting units was substantially in excess of its carrying value, with the exception of the Education reporting unit, where the excess of the fair value over its carrying value was less than 20%. A 10% decrease in the estimated fair value of any of our reporting units would not have resulted in a different conclusion. We concluded there were no indicators of impairment.

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.
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36


DescriptionJudgments and UncertaintiesEffect if Actual Results Differ from Assumptions
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.

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.
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 2023 by $14.8 million. In 2022, we decreased our total reserves related to prior years claims by $36.8 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 $35.1 million for 2023.


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Accounting Pronouncements
Accounting Standard UpdatesTopicSummaryEffective Date/
Method of Adoption
2022-04
Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program ObligationsThis Accounting Standard Update (“ASU”), issued in September 2022, is designed to enhance transparency around supplier finance programs by requiring new disclosures that would allow a user of the financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude.

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 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted.
2023-07
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
This ASU, issued in November 2023, improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU requires disclosure, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker, and an amount for other segment items by reportable segment, with a description of its composition. We are currently evaluating the impact of implementing this guidance on our financial statements; however, we do not expect adoption to have a material impact.
This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.


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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, “Debt,” 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 SOFR 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, 2023, we had total outstanding borrowings of $1,313.8 million. To limit exposure to upward movements in interest rates associated with our floating-rate, SOFR-based borrowings, we entered into interest rate swap agreements to fix the interest rates on a portion of our outstanding borrowings. At October 31, 2023, we had interest rate swaps with an underlying notional amount of $820.1 million and fixed interest rates ranging from 1.72% to 3.81%. Based on our average borrowings, interest rates, and interest rate swaps in effect at October 31, 2023 and 2022, a 100 basis point increase in SOFR, EURIBOR, and SONIA would decrease our future earnings and cash flows by $5.4 million and $5.2 million, respectively. 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, 2023, the fair value of our interest rate swap agreements was an asset of $36.4 million.
Foreign Currency Exchange Rate Risk
We are primarily exposed to the impact of foreign exchange rate risk through our UK and Ireland operations where the functional currency is the British pound sterling (“GBP”) and Euro (“EUR”), respectively. 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.
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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, 2023 and 2022, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended October 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended October 31, 2023, 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, 2023, 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 18, 2023, 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 matter communicated below is a matter 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) relates 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 matter 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 matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

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
40


insurable risks. The balance of casualty program insurance reserves, net of recoverables, as of October 31, 2023, amounted to $487.9 million. The Company engages actuaries to estimate its self-insurance liabilities at least annually.

We identified the evaluation of certain self-insurance liabilities as a critical audit matter because it involves a high degree of judgment and actuarial expertise to assess: (1) the actuarial models used and (2) estimated incurred but not reported claims based on application of loss development factors to historical claims experience.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s self-insurance liability process, including controls related to (1) evaluation of claims information sent to the actuary, (2) estimation of incurred but not reported claims based on the application of loss development factors to historical claims experience, and (3) evaluation of the actuarial report and the external actuarial specialist’s qualifications and competency. We evaluated the Company’s historical ability to estimate self-insurance liabilities by comparing the prior year recorded amounts to the subsequent claim development. We tested a sample of the claims data utilized by the Company’s actuaries by comparing it to underlying claims details; and involved an actuarial professional with specialized skills and knowledge who assisted in the:

assessment of the actuarial models used by the Company for consistency with generally accepted actuarial standards and
development of an actuarial estimate of self-insurance liabilities based on the Company’s underlying historical paid and incurred loss data for comparison with the liabilities recorded by the Company.

/s/ KPMG LLP

We have served as the Company’s auditor since 1980.

New York, New York
December 18, 2023

41


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, 2023, 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, 2023, 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, 2023 and 2022, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended October 31, 2023, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated December 18, 2023, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


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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 18, 2023

43


ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 31,
(in millions, except share and per share amounts)20232022
ASSETS
Current assets
Cash and cash equivalents$69.5 $73.0 
Trade accounts receivable, net of allowances of $25.0 and $22.6 at
   October 31, 2023 and 2022, respectively
1,365.0 1,278.7 
Costs incurred in excess of amounts billed139.2 75.8 
Prepaid expenses78.5 82.1 
Other current assets58.6 51.6 
Total current assets1,710.7 1,561.2 
Other investments28.8 14.5 
Property, plant and equipment, net of accumulated depreciation of $326.5 and
    $296.9 at October 31, 2023 and 2022, respectively
131.5 125.4 
Right-of-use assets113.4 115.2 
Other intangible assets, net of accumulated amortization of $438.3 and
   $459.8 at October 31, 2023 and 2022, respectively
302.9 378.5 
Goodwill2,491.3 2,485.6 
Other noncurrent assets155.0 188.5 
Total assets$4,933.7 $4,868.9 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of debt, net$31.5 $181.5 
Trade accounts payable299.1 315.5 
Accrued compensation249.7 246.6 
Accrued taxes—other than income58.9 124.7 
Deferred revenue
90.1 46.3 
Insurance claims177.0 171.4 
Income taxes payable17.9 6.6 
Current portion of lease liabilities 32.5 30.3 
Other accrued liabilities261.2 230.2 
Total current liabilities1,217.9 1,353.2 
Long-term debt, net1,279.8 1,086.3 
Long-term lease liabilities98.8 104.5 
Deferred income tax liability, net85.0 89.7 
Noncurrent insurance claims387.5 387.7 
Other noncurrent liabilities61.1 126.0 
Noncurrent income taxes payable3.7 4.2 
Total liabilities3,133.8 3,151.7 
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.01 par value; 500,000 shares authorized; none issued
  
Common stock, $0.01 par value; 100,000,000 shares authorized;
    62,847,387 and 65,587,894 shares issued and outstanding at
    October 31, 2023 and 2022, respectively
0.6 0.7 
Additional paid-in capital558.9 675.5 
Accumulated other comprehensive loss, net of taxes(9.2)(16.2)
Retained earnings1,249.6 1,057.2 
Total stockholders’ equity1,799.9 1,717.2 
Total liabilities and stockholders’ equity$4,933.7 $4,868.9 
See accompanying notes to consolidated financial statements.
44


ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended October 31,
(in millions, except per share amounts)202320222021
Revenues$8,096.4 $7,806.6 $6,228.6 
Operating expenses7,037.6 6,757.5 5,258.2 
Selling, general and administrative expenses572.8 628.3 719.2 
Amortization of intangible assets 76.5 72.1 45.0 
Operating profit409.5 348.8 206.3 
Income from unconsolidated affiliates3.9 2.4 2.1 
Interest expense(82.3)(41.1)(28.6)
Income before income taxes331.1 310.0 179.8 
Income tax provision(79.7)(79.6)(53.5)
Net income251.3 230.4 126.3 
Other comprehensive income
Interest rate swaps(0.5)36.7 4.5 
Foreign currency translation and other7.3 (19.8)5.3 
Income tax provision0.1 (10.5)(1.5)
Comprehensive income$258.1 $236.9 $134.5 
Net income per common share
Basic$3.81 $3.44 $1.87 
Diluted3.79 3.41 1.86 
Weighted-average common and common equivalent shares outstanding
Basic66.0 67.1 67.4 
Diluted66.3 67.5 68.0 
See accompanying notes to consolidated financial statements.
45


ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended October 31,
202320222021
(in millions, except per share amounts)SharesAmountSharesAmountSharesAmount
Common Stock
Balance, beginning of year65.5 $0.7 67.3 $0.7 66.7 $0.7 
Stock issued under employee stock purchase and share-based
   compensation plans
0.6  0.6  0.6  
Repurchase of common stock, including excise taxes
(3.3)(0.1)(2.3)   
Balance, end of year62.8 0.6 65.5 0.7 67.3 0.7 
Additional Paid-in Capital
Balance, beginning of year675.5 750.9 724.1 
Taxes withheld under employee stock purchase and share-based compensation plans, net
(9.0)(8.4)(6.7)
Share-based compensation expense30.5 30.5 33.5 
Repurchase of common stock, including excise taxes
(138.1)(97.5) 
Balance, end of year558.9 675.5 750.9 
Accumulated Other Comprehensive Loss, Net of Taxes
Balance, beginning of year(16.2)(22.5)(30.8)
Other comprehensive income
6.9 6.3 8.2 
Balance, end of year(9.2)(16.2)(22.5)
Retained Earnings
Balance, beginning of year1,057.2 880.2 806.4 
Net income251.3 230.4 126.3 
Dividends
Common stock ($0.88, $0.78, and $0.76 per share)
(57.5)(51.9)(51.0)
Stock issued under share-based compensation plans(1.5)(1.5)(1.5)
   Balance, end of year1,249.6 1,057.2 880.2 
Total Stockholders’ Equity$1,799.9 $1,717.2 $1,609.2 
See accompanying notes to consolidated financial statements.


46


ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended October 31,
(in millions)202320222021
Cash flows from operating activities
Net income$251.3 $230.4 $126.3 
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization120.7 112.4 89.9 
Impairment loss on fixed assets  9.1 
Deferred income taxes(4.9)67.7 (48.0)
Share-based compensation expense30.5 30.5 33.5 
Provision for/(Recovery of) bad debt3.0 (7.7)0.6 
Amortization of accumulated other comprehensive gain on interest rate swaps (4.8)(6.4)
Discount accretion on insurance claims0.4 0.1 0.1 
(Gain)/Loss on sale of assets(0.1)(0.8)0.2 
Income from unconsolidated affiliates(3.9)(2.4)(2.1)
Distributions from unconsolidated affiliates1.9 1.9 1.9 
Change in fair value of contingent consideration(45.6)  
Changes in operating assets and liabilities, net of effects of acquisitions
Trade accounts receivable and costs incurred in excess of amounts billed(152.7)(143.8)(124.5)
Prepaid expenses and other current assets(7.4)19.7 6.8 
Right-of-use assets1.8 14.7 19.3 
Other noncurrent assets33.8 (21.2)13.8 
Trade accounts payable and other accrued liabilities(3.8)(143.0)265.7 
Long-term lease liabilities(5.7)(15.2)(16.3)
Insurance claims5.0 (17.4)(28.4)
Income taxes payable15.1 (31.8)8.3 
Other noncurrent liabilities3.8 (69.0)(35.4)
Total adjustments(8.0)(210.0)188.0 
Net cash provided by operating activities243.3 20.4 314.3 
Cash flows from investing activities
Additions to property, plant and equipment(52.6)(50.8)(34.3)
Proceeds from sale of assets2.9 6.0 4.4 
Investments in equity securities(12.4)(2.1) 
Purchase of business, net of cash acquired (194.6)(710.2)
Net cash used in investing activities(62.1)(241.5)(740.0)
Cash flows from financing activities
Taxes withheld from issuance of share-based compensation awards, net (10.5)(9.9)(8.1)
Repurchases of common stock, including excise taxes(138.1)(97.5) 
Dividends paid(57.5)(51.9)(51.0)
Deferred financing costs paid  (6.4)
Borrowings from debt1,178.5 1,479.4 357.7 
Repayment of borrowings from debt(1,136.0)(1,096.9)(194.2)
Changes in book cash overdrafts(20.3)4.3 (17.9)
Financing of energy savings performance contracts0.5 9.9 15.1 
Repayment of finance lease obligations(3.0)(1.9)(2.8)
Net cash (used in) provided by financing activities(186.3)235.5 92.4 
Effect of exchange rate changes on cash and cash equivalents1.6 (4.2)1.9 
Net (decrease) increase in cash and cash equivalents(3.5)10.2 (331.4)
Cash and cash equivalents at beginning of year73.0 62.8 394.2 
Cash and cash equivalents at end of year$69.5 $73.0 $62.8 
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ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
Years Ended October 31,
(in millions)202320222021
Supplemental cash flow information
Income tax payments, net$69.1 $46.4 $93.5 
Interest paid on credit facility89.4 28.9 14.3 
See accompanying notes to consolidated financial statements.
48


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:
https://cdn.kscope.io/7c9d69e712d5ad269674c1c6891749e5-FN1.jpg
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 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.
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.
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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, 2023 and 2022, other current assets primarily consisted of other receivables, short-term insurance recoverables, and capitalized commissions.
Other Investments
At October 31, 2023 and 2022, other investments primarily consisted of preferred equity investments and investments in unconsolidated affiliates and were $28.8 million and $14.5 million, respectively. We did not recognize any impairment charges on these investments in 2023, 2022, or 2021.
Preferred Equity investments
We own non-controlling interests (generally under 20%) in entities that provide specialized services. Our investments do not have readily determinable fair values; therefore, we measure the investment at initial cost less impairment, if any.
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 have significant influence over such investments and account for them 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.
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:
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CategoryYears
Computer equipment and software
37
Machinery and other equipment
35
Transportation equipment
1.510
Buildings
1040
Furniture and fixtures
5
In addition, we depreciate assets under finance leases and leasehold improvements over the shorter of their estimated useful lives or the remaining lease term. Upon retirement or sale of an asset, we remove the cost and accumulated depreciation from our Consolidated Balance Sheets. When applicable, we record corresponding gains or losses within the accompanying Consolidated Statements of Comprehensive Income.
Leases
We account for our leases in accordance with ASU 2016-02, Leases (Topic 842). Topic 842 requires lessees to recognize substantially all leases on their balance sheet as a right-of-use (“ROU”) asset and a lease liability. We made the accounting policy election to not recognize leases with an initial term of 12 months or less on the balance sheet and will expense payments for such leases on a straight-line basis over the lease term. We also elected to not separate lease components from non-lease components.
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. 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. The present value of future lease payments is determined using our incremental borrow rate (“IBR”) unless the implicit rate in the lease is readily determinable. Our IBR is equal to our rate of interest adjusted for term differences. This IBR is applied to the minimum lease payments within each lease agreement to determine the amounts of our ROU assets and lease liabilities.
Our lease terms range from one to 30 years. Some leases include options to renew or extend. We typically include extension options in a lease term when it is reasonably certain that we will exercise that option and when doing so is at our sole discretion. Certain equipment and vehicle leases may also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Typically, if we decide to cancel or terminate a lease before the end of its term, then we would owe the lessor the remaining lease payments under the term of such lease. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. We may rent or sublease certain real estate assets that we no longer use to third parties.
Lease agreements may contain rent escalation clauses, rent holidays, or certain landlord incentives, including tenant improvement allowances. ROU assets include amounts for scheduled rent increases and are reduced by lease incentive amounts.
Certain of our lease agreements include variable rent payments consisting primarily of rental payments adjusted periodically for inflation, 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 4, “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
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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, 2023 and 2022, other noncurrent assets primarily consisted of long-term insurance recoverables, interest rate swap assets, capitalized commissions, cloud computing arrangements, prepayments to carriers for future insurance claims, and insurance deposits.
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.
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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